President Donald Trump’s administration is taking aim at state laws that prohibit including medical debt on consumers’ credit reports.
In late October, the Consumer Financial Protection Bureau issued a so-called interpretive rule saying that laws banning medical debt reporting in 15 states supersede the Fair Credit Reporting Act.
The move is not legally binding, but it marks a sudden shift from the CFPB’s guidance under former President Joe Biden’s administration, which allowed states to create their own credit rules as long as they did not “conflict” with federal law. For example, a state’s requirement that each credit bureau provide consumers with two free credit reports per year is consistent with the FCRA’s one-time credit report requirement.
Consumer credit advocates are sounding the alarm. Chi Chi Wu, senior attorney at the National Consumer Law Center, said millions of Americans already face the possibility of higher health insurance premiums, and the reality is that many more could be burdened with medical debt.
If medical debt protection declines, “we’re going to mess with your credit record and make things even worse,” Wu says. “That’s just insult to injury. It’s like rubbing salt in a wound.”
what is the problem
Medical debt is a major source of financial anxiety for U.S. consumers. According to a 2024 analysis by the Kaiser Family Foundation, Americans owe about $220 billion in medical debt, with about 14 million people owed more than $1,000 and 3 million owed more than $10,000.
The three major credit bureaus will stop reporting medical debts of less than $500 in April 2023. For the 15 states that have gone a step further by banning medical debt from appearing on credit reports, the rationale is simple: Adding the data to credit reports is unnecessarily punitive, Wu said.
The CFPB declined to comment on the reasoning behind the guidance. However, the agency’s previous document detailed why it claims medical debt reporting harms consumers.
Former CFPB Director Rohit Chopra said earlier this year that “no one should have their financial future ruined if they get sick.” He went on to say that reporting debts “allowed debt collectors to abuse the credit reporting system and force people to pay medical bills they didn’t owe.”
Essentially, allowing medical debt to appear on a credit report, whose associated score determines a consumer’s access to credit and ability to purchase a home, places the burden on consumers to overcome sudden and difficult-to-understand debt.
For proponents of putting medical debt on credit reports, “the argument is that credit reports are more accurate because there’s more information, and you don’t want to lend to people who have a lot of medical debt,” Wu said.
However, a study published in April 2025 by the National Bureau of Economic Research found that removing medical data from credit reports is “unlikely to impact credit outcomes.” That’s because people with large medical debts typically accumulate other types of debt to pay for treatment, Wu said.
“If you’re really struggling financially with medical debt, the first thing that happens is that your credit card balances skyrocket, even if you started with a halfway decent credit score,” she says.
In other words, credit issuers may have all the information they need to determine your creditworthiness just by looking at your credit card usage, which makes up the bulk of your score. Adding medical debt to a credit report will push out depressed consumers, Wu said.
“That’s up to the judge, not the CFPB.”
Although the CFPB’s interpretive rules are likely the government’s first step in lifting the ban on medical debt reporting, the guidance itself is not legally binding. Rather, these laws will have to be challenged in court, said Brad Lipton, a former CFPB general counsel whose name appears in the Biden-era guidance.
“Ultimately it’s up to the judge, not the CFPB,” he says. Recent guidance, as well as any contradictions, are only part of the evidence for judges to consider.
During that time, he says, the state’s ban “hasn’t been all that controversial.” That’s because medical debt credit reporting isn’t a big factor in paying medical bills, he said.
“When people don’t pay their medical debts, it’s often because they simply don’t have the money,” he says. “The government and the system can torture them all they want, but it doesn’t make them much money. It’s water out of stone.”
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