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A federal rule restricting the debt’s inclusion has been canceled. Now, the consumer bureau is trying to overturn state restrictions.

Credit...Till Lauer

Oct. 31, 2025, 9:00 a.m. ET

A court ruling this summer canceled a Biden-era federal effort to remove medical debt from credit reports. Now, the Trump administration is seeking to thwart similar state efforts, potentially eroding protections for Americans who struggle to pay health care bills.

Fifteen states have passed laws in recent years restricting the inclusion of medical debt on credit reports in some way. The reports, and the three-digit credit scores that summarize them, act as financial gatekeepers that determine if people can qualify for loans and what interest rate they’ll pay. A blemished credit history can also make it hard to rent an apartment or get a job.

About 14 million people, or 6 percent of adults, owed more than $1,000 in medical debt in 2021, according to an analysis by KFF, a health research group.

On Tuesday, the Consumer Financial Protection Bureau published guidance saying Biden-era guidance was “wrong” in concluding that states can regulate the use of information like medical debt in credit reports.

Federal credit reporting law, the new guidance said, overrides state laws that “touch on broad areas of credit reporting.” The notice in the Federal Register was signed by Russell T. Vought, the White House budget director, who is also serving as the bureau’s acting head.

The Consumer Data Industry Association, which represents credit bureaus, applauded the consumer bureau’s action, saying there should be “one national standard” to govern how information is provided to the credit bureaus.

The consumer bureau’s guidance, formally known as an interpretive rule, “does not have the force or effect of law,” the bureau noted.

But the new guidance may well invite court challenges to the state laws, said Ted Mermin, executive director of the Center for Consumer Law & Economic Justice at the University of California, Berkeley, School of Law.

Benjamin Corb, a spokesman for the Consumer Data Industry Association, said in an email that “the industry is keeping all options open at this time.”

As Mr. Vought and the Trump administration have worked to defang the watchdog consumer bureau, consumer advocates have looked to states as a backstop for consumer protections.

Allison Sesso, president of Undue Medical Debt, a nonprofit that buys bulk medical debt at a discount and pays it off for borrowers, said the new guidance was disappointing. But she cautioned that nothing had changed yet and that states “should and will” fight any challenges to their laws. In a recent survey that her group conducted with NORC, a nonpartisan research group at the University of Chicago, three-fourths of voters said they wanted their state to pass laws that would protect people from medical debt.

As many Americans prepare to choose health coverage for 2026 during the annual open enrollment period, they are confronting steeper costs in both employer plans and those sold on Affordable Care Act marketplaces, where many face double-digit premium increases. Cuts to Medicaid, the health program for the poor, are also likely to make care costlier for many Americans next year.

“A lot more people are going to incur medical debt,” said Julie Margetta Morgan, a former consumer bureau official who is president of the Century Foundation, a left-leaning think tank.

Is any medical debt banned from credit reports?

The three big credit bureaus — Equifax, Experian and TransUnion — voluntarily removed medical debts under $500 from credit reports in 2023, and that policy remains in place, a spokesman for the industry association said. The consumer bureau said in 2024 that the policy had reduced the share of Americans with unpaid medical bills in their credit files, but that further reforms were still needed.

The industry argues that regardless of how people acquire medical debt, lenders need to know if borrowers owe significant amounts of money in order to make sound decisions about whether to extend credit.

How does medical debt get onto credit reports?

Typically, doctors and hospitals don’t directly report unpaid bills to credit bureaus but may send them to collection agencies, which report delinquencies. In some cases, providers may sue patients directly.

Why was medical debt previously banned from credit reports?

In 2022, the consumer bureau under the Biden administration issued guidance saying the federal Fair Credit Reporting Act allowed states to ban medical debt from credit reports. The bureau said its research showed that medical bills weren’t as “predictive” of repayment risk as other types of debt because medical debt was often unplanned and medical billing was complex. The role of insurance can slow things down, and there may be disagreements about whether a bill is really owed.

In 2024, the Biden administration proposed a formal rule to eliminate medical debt from credit reports and deemed it final in January, just before President Trump took office. But before the rule took effect, two industry groups sued to stop it, arguing that the bureau had overstepped its authority. The Trump administration supported the plaintiffs, and in July a federal judge voided the rule, while also questioning similar state laws.

How can consumers avoid medical debt?

If consumers get a medical bill they can’t afford, they should try to negotiate a reduction with their provider, Ms. Sesso at Undue Medical Debt said. Make sure the doctor or hospital has a full picture of your financial situation, she said, and make it clear if you are strapped in other ways, not just struggling to pay a single bill.

Ms. Sesso also suggested that consumers ask if a hospital offers financial assistance, including charity care. Medical providers are aware that even people with insurance may have high deductibles and can struggle with medical bills, she said.

“People do slip through the cracks,” she said. “Look into it, and apply for it.”

If you don’t qualify for financial help, request a payment plan. But be sure you can afford the payments before agreeing to the plan, Ms. Sesso said. If the amount is too high, you may fall behind and end up defaulting anyway.

If you’re not comfortable negotiating on your own, seek help from a friend.

Do not put medical bills on a credit card, Ms. Sesso said. You may pay high interest rates on the debt, and because it’s no longer distinguishable as medical debt, it can be more difficult to negotiate payment plans.

Yolanda Pierson, 49, of Blaine, Minn., said she had learned from hard experience to ask about financial help if the cost of medical treatment seemed overwhelming.

Ms. Pierson said her son had a rare eye disease that required multiple surgical procedures over several years. Even though she had insurance, she amassed thousands of dollars in medical debt on credit cards and was eventually sued for payment in court. Only later, she said, did she learn that she would have qualified for financial assistance.

“They never offered financial support,” she said. “I never asked, ‘Is there help?’”

Ms. Pierson said her experience had led her to testify in support of a Minnesota law that took effect in 2023 and requires hospitals to screen patients for possible qualification for financial help or discounted services and to help them apply before sending any debt to collections.

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