The Trump administration has issued an interpretive rule that undermines state laws forbidding the inclusion of medical debt on consumers’ credit reports.
The guideline published in the Federal Register Tuesday by the Consumer Financial Protection Bureau (CFPB) received quick condemnation from patient and consumer advocacy groups. Though not legally binding on its own, they said the publication is likely to play a factor in ongoing or future litigation against states’ laws.
“Advocates in states that have already banned medical debt on credit reports or the reporting of non-conviction records should be alert to potential legal,” Chi Chi Wu, director of consumer reporting and data advocacy at the National Consumer Law Center, said in an emailed statement. Such legal challenges are already underway in Maine and Colorado, she added.
The new interpretive rule outlines the federal government’s view that state laws with credit report content restrictions are preempted by the Fair Credit Reporting Act (FCRA)—a decades-old statute that serves as the foundation for credit reporting standards and consumer protections.
The CFPB’s interpretive rule cites updates Congress made over the years that, the agency said, were intended to provide a unified national regulation rather than a “patchwork system of conflicting regulations.” In the CFPB’s view, that intent means it’s not up to states to decide whether certain content or information that wasn’t specifically outlined in the FCRA—such as medical debt or non-conviction criminal arrest records—should appear on consumer credit reports.
Of note, this viewpoint is nearly a complete flip from a 2022 interpretive rule issued by the CFPB under the prior administration, which specifically outlined these and other content areas as open to state regulation. The 2022 interpretive rule was withdrawn by the CFPB in May.
There are 16 states with laws on the books that ban medical debt from credit reports, and similar legislation is pending in at least two more. Advocates for such bans have pointed to longstanding research suggesting medical debt has limited predictive value for credit underwriting, and more recent investigations suggesting rampant billing errors among medical debts.
The CFPB, in 2024, found that 15 million Americans had a collective $49 billion of outstanding medical bills on their credit reports despite voluntary decisions by the nation’s three leading credit reporting companies to stop reporting smaller or resolved medical bills. Those with the debt on their reports disproportionately lived in low-income communities and the South (where state-level bans are less prevalent).
The CFPB had also finalized a rule during the waning days of the Biden administration that would similarly ban medical debt’s inclusion nationwide. This was challenged in court by trade groups and tossed by a judge in July—a decision backed by the revamped CFPB under acting Director Russell Vought, who is also director of the Office of Management and Budget and had called for the CFPB’s abolishment in the Project 2025 political playbook.
"We shouldn’t be letting an error made by a hospital or an insurance company impact someone’s ability to buy a house or get an education, which is why in the Biden administration we banned the inclusion of medical bills on credit reports used by lenders," said Julie Morgan, president of The Century Foundation, a progressive think tank, and formerly the associate director for research, monitoring and regulations at the CFPB under President Joe Biden. "This guidance is another step in President Trump’s efforts to rig the system against patients by blocking states from stepping in to protect their own residents.”
The Consumer Data Industry Association, one of the plaintiff trade groups in that case, applauded the CFPB’s new interpretive rule and agreed with its pursuit of a national credit reporting standard.
“The Bureau’s new interpretive rule explains that allowing divergent state regulation would fragment the consumer-reporting market across state lines, potentially increasing borrowing costs for consumers based on where they live rather than their credit risk,” the association wrote in a statement. “This rule will help to ensure that the American consumer credit system remains the best, most accurate, most fair system for making consumer credit decisions. We thank the Bureau for this important effort to keep a unified national standard in place.”
Undue Medical Debt, a nonprofit that partners with healthcare organizations and local governments to extinguish medical debt, described the new guideline as a step backward for protections against crippling medical costs. In a statement, Allison Sesso, the group’s president and CEO, condemned the CFPB’s interpretation and said pervasive medical debts are “an economic crisis that’s keeping families from building wealth and fully participating in the economy. When credit scores are dinged by medical bills, everyone loses.”
Sesso also pointed to survey data her organization published this week suggesting support for state-level restrictions on medical debt in credit reports is widely popular among voters regardless of their political affiliation.
“This ruling ignores overwhelming public demand for states to shield residents from financial harm caused by our unaffordable healthcare system,” Sesso said. “… While today’s rule will ultimately play out in the courts, we urge states to continue to take action and position themselves as leaders in healthcare affordability.”
Wu, with the National Consumer Law Center, emphasized that the new interpretive rule and its pulled counterpart from 2022 are “only entitled to persuasive value. Given that the CFPB took the entirely opposite position three years ago, we can argue that this new interpretive rule should not be persuasive at all.”
That said, Wu said states could still achieve the same goals while avoiding the issue of FCRA preemption with requirements that medical debt on credit reports be excluded from creditors, landlords and employers’ decision-making. States could also force healthcare providers to include provisions in their contracts with debt collectors that would prohibit the debts from being reported to a credit bureau.
Wu also pointed to the broader landscape of rising costs and coverage premiums, noting that the CFPB’s new position will add to consumers’ mounting economic burdens.
"As millions face steep hikes in their insurance premiums and might lose coverage—which is what the whole government shutdown fight is about—Trump and Vought don't just want to saddle struggling consumers with medical debt. They also want to make sure the medical debt trashes their financial report cards, making it harder for them to, not only get credit, but rental housing and jobs,” she said.