The Trump administration has issued new guidance that could undermine ongoing state efforts to keep medical debt off consumers’ credit reports.
State Medical Debt Shields Under Threat
The Consumer Financial Protection Bureau (CFPB) released new guidance on Tuesday, asserting that federal law prohibits states from excluding medical debts from credit reports. The CFPB argues that this authority is solely held by the federal government.
The new interpretation of the Fair Credit Reporting Act, signed by Russell Vought, the White House budget director and acting head of the CFPB, reverses policies initiated under former President Joe Biden that aimed to empower states to extend protections for individuals with medical debt.
Although the new guidance does not immediately override current state protections, it poses a risk to the progress made by more than a dozen states that have enacted laws in recent years to prevent medical debt from affecting consumers’ credit, including Washington, Oregon, California, and New York.
Bipartisan concerns have driven these state-level initiatives, with lawmakers warning that medical debt on a credit report can block people from obtaining housing, a vehicle, or employment. Similar protections are now being weighed in several conservative states across the Midwest and Mountain West.
The ‘Chilling Effect’ Of New Guidance
In July 2025, a Texas judge blocked the Biden-era rule that would have removed medical debt from consumer credit reports. This decision sided with the credit industry and the Trump administration’s arguments that regulators had overstepped their authority.
Lucy Culp, who leads state advocacy efforts for Blood Cancer United, told KFF Health News, said, “This rule will have a chilling effect on states’ willingness to pass these critical patient protections.”
Experts previously stated that the rising costs of healthcare, including a surge in high-cost prescriptions, are expected to drive up health insurance premiums by more than 75% in 2026.
The Trump administration’s latest move to weaken protections for those with medical debt could compound the financial challenges faced by many Americans, especially those already struggling with rising consumer and healthcare costs.
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
