Trump administration issues guidance impacting medical debt protections
The Trump administration has issued new guidance that undermines state efforts to protect consumers from medical debt affecting their credit reports, reports BritPanorama.
This change threatens the protections already enacted by over a dozen states, including Washington, Oregon, California, Colorado, Minnesota, Maryland, New York, and most of New England, which prevent medical debt from impacting credit ratings.
Several more states, particularly in conservative areas of the Midwest and the Mountain West, have been evaluating similar laws due to bipartisan concerns about the difficulties medical debt poses in securing housing, transportation, or employment. Nationally, approximately 100 million people deal with some form of healthcare debt, with many facing unpaid bills exceeding $10,000.
The Consumer Financial Protection Bureau (CFPB) has stated that federal law preempts state regulations concerning medical debts on credit reports. “Congress meant to occupy the field of consumer reporting and displace state laws,” the CFPB concluded in an interpretive rule signed by Russell Vought, the White House budget director and acting CFPB head.
The recent guidance reverses policies initiated by former President Joe Biden aimed at allowing states to extend protections for those burdened by medical debt. Currently, existing state protections will not be immediately revoked.
However, advocates for patients express concerns that this guidance could hinder further progress on the state level, particularly as millions of Americans face a potential loss of federal aid related to health insurance, amid ongoing budget negotiations in Congress.
“You’d be hard-pressed to find a crueler regulatory interpretation,” remarked Elisabeth Benjamin, a vice president at the Community Service Society of New York, which has actively campaigned for medical debt protections. Lucy Culp from Blood Cancer United warned that the guidance could significantly restrain states from passing critical patient protections.
The CFPB did not respond to requests for comment regarding the implications of this guidance, which may trigger more litigation challenging state restrictions on medical debt’s impact on credit reporting.
Trade associations for credit reporting agencies and debt collectors previously litigated against Biden-era regulations designed to eliminate such medical debt from credit reports nationwide, arguing that the administration overstepped its authority.
While the now-blocked restrictions would have benefited approximately 15 million individuals, the Trump administration chose not to defend these regulations, leading to a federal judge’s ruling that nullified them before implementation.
The Consumer Data Industry Association has welcomed the Trump administration’s guidance, advocating for a single national standard for information provided to consumer reporting agencies. President Dan Smith stated that consistent standards are needed to determine what can appear on individuals’ credit reports.
Many argue that stronger health insurance protections could mitigate the risk of Americans falling into debt and suffering hits to their credit ratings. Nonetheless, as a result of recent tax and spending legislation, millions may soon find themselves without health coverage.
“Millions of Americans are avoiding medical care, putting off needed surgeries, skipping essential treatments,” said Allison Sesso, leader of Undue Medical Debt, a nonprofit working to alleviate patient debts while advocating for enhanced protections. She added, “This isn’t just a health care issue; it’s an economic crisis hampering families from building wealth and participating fully in the economy.”
