By Christine Chen Zinner and Chuck Bell
In early January 2025, the Consumer Financial Protection Bureau (CFPB) finalized a medical debt rule that would have helped 15 million people in the United States with unjustly lowered credit scores due to medical debt. This rule would have removed most medical debt off credit reports and prohibited credit decisions based on medical debt. Medical debt collectors have sued to block its implementation. Although advocacy groups like the National Consumer Law Center intervened in the case, a federal court recently vacated the rule, which will no longer go into effect as originally hoped at the federal level.
Unlike other forms of debt, CFPB’s research has found that medical debt has little predictive value for a consumer’s ability to repay their other financial debts. In addition, medical debt information is often inaccurate because of long lag times for insurance reimbursement and myriad mistakes in medical billing. CFPB’s rule would have ensured that medical debt would not unfairly damage an individual’s creditworthiness as a result of an injury or illness, due to no fault of their own. The CFPB estimated the policy change would increase the credit scores of consumers with medical debt by an average of 20 points and expand access to affordable mortgages for 22,000 consumers annually.
With the CFPB medical debt rule blocked from going into effect, there are an estimated 15 million individuals in the United States who have large medical debts that are over $500 and over a year old that can still potentially be reported to credit bureaus. Having that debt stay on their credit reports continues to punish them with years of higher interest rates, more expensive loans, and lost opportunities to access credit. These negative credit impacts can hit anyone—even a fully insured healthy individual, who may find themselves unexpectedly saddled with tens of thousands of dollars worth of medical debt if they experience a surprise medical event. Reporting medical debt to credit bureaus provides debt collectors with a powerful tool to pressure and harass vulnerable consumers to pay off the debt more quickly.
People accrue medical debt when they aren’t able to pay for their care, and this debt can erode savings, lower credit scores, and even cause families to cut back on basic household expenses like food and health care. Nearly 140 million people in the United States have faced medical financial hardship due to out-of-pocket health care bills. The Kaiser Family Foundation has estimated that, in aggregate, people in the United States owe a whopping $220 billion in medical debts.
For 15 million people who have reportable medical debts, a variety of factors put them at risk—including a more modest income, lower household wealth, little to no health insurance coverage, higher medical needs, and/or less access to quality health care. That debt is dire: The average amount of debt held is $3,100. Over 500,000 medical bankruptcies are filed annually, and two-thirds of bankruptcies filed in the United States are related to medical expenses or related work loss.
For Black, Latino, and other people of color, decades of discriminatory policies and practices across federal, state, and local housing, employment, education, and health care policies and programs, alone and in combination, have resulted in lower incomes and household wealth, greater health care needs, less insurance coverage, less access to quality and affordable care, all of which lead to higher levels of medical debt.
To make this financial precarity even worse, Congress recently enacted legislation that could make the medical debt crisis much worse. The budget reconciliation bill passed by Congress earlier this year Medicaid funding by $800 billion and changed the Affordable Care Act, leaving 10.9 million more individuals without health insurance. As many as 16 million more people will be uninsured by 2034, further increasing levels of medical debt for these individuals and families.
At a time when millions of Americans are set to lose their health insurance, the CFPB’s medical debt rule would have helped make sure people aren’t hit twice: first by losing their healthcare coverage and then compounded by several years of more expensive credit and loans due to the ensuing medical debt hitting their credit reports and lowering their scores.
Thankfully, as of this writing, fifteen states have passed versions of the CFPB’s medical debt rule. Residents of California, Colorado, Connecticut, Delaware, Illinois, Maine, Maryland, Minnesota, New Jersey, New York, Oregon, Rhode Island, Vermont, Virginia, and Washington will not have to worry about medical debt impacting their credit score. Ohio is currently considering the Ohio Medical Debt Fairness Act, which would ban credit reporting for medical debt, limit the interest rate for medical debt to 3%, and ban wage garnishment for medical debt collection. While state legislation to take medical debt off credit reports does not address the underlying causes for medical debt, these protections are an important first step towards making sure no one is denied credit, or faced with more expensive credit because they have medical debt. Nobody should be punished with years of more expensive loans just because they had an unexpected health event.
These protections would be especially important for the 10 states that have not expanded Medicaid coverage, meaning residents have higher levels of medical debt that will hurt their ability to fully participate in this economy. (For example, 79 of the 100 counties with the highest levels of medical debt are in states that have not expanded Medicaid coverage.)
For states that have not passed a bill to prohibit medical debt credit reporting, now is the time to call your state lawmakers and demand action. Several national organizations can provide information and assist state advocates on this issue, including the National Consumer Law Center, Community Catalyst, Consumer Reports and Blood Cancer United (formerly the Leukemia and Lymphoma Society). A map of states with state laws banning medical debt credit reporting and citations to each law is available from the Consumer Federation of America.
Christine Chen Zinner is the former consumer policy counsel for the Americans for Financial Reform Education Fund. Chuck Bell is a financial policy advocate at Consumer Reports.