In January 2025, the Consumer Financial Protection Bureau (CFPB) finalized a regulation to remove all medical debt, whether paid or unpaid, from credit reports. This measure was intended to benefit many consumers who are negatively impacted by medical debt collections appearing on their credit reports. Although the initiative faced considerable opposition from various industry sectors, the CFPB remained committed to its implementation. However, with the change in administration, things are taking a turn.
The original ruling, which was scheduled to take effect in March 2025, was temporarily stayed by a judge in the Eastern District of Texas for 90 days, extending the enforcement date to June 2025. This action followed a lawsuit filed by the Consumer Data Industry Association (CDIA) and the Cornerstone Credit Union League, which oversees approximately six hundred credit unions. The plaintiffs argued that the ruling “exceeded the bureaus’ statutory authority.”
On June 11th, a subsequent hearing was held, and the stay was extended until August 11th, 2025. It is anticipated that the ruling may ultimately be vacated, as the Consumer Financial Protection Bureau (CFPB) is now adopting a different position and aligning with the CDIA and Cornerstone Credit Union League. The National Consumer Law Center is currently supporting the ruling.
Additionally, some members of Congress have introduced resolutions under the Congressional Review Act with the aim of overturning the medical debt rule.
ACA International, the trade association representing debt collection agencies, has expressed opposition to the ruling. Their argument is that it may impose significant burdens on collection agencies and could potentially hinder consumers’ access to healthcare, as individuals might be required to pay substantial upfront fees before receiving services or procedures.
It has long been debated as to whether medical debt is an adequate determining factor of a consumer’s credit worthiness. The credit bureaus have in the past few years taken steps to remove some medical debt. As of now all paid medical debt is removed from a consumers report and no medical debt under $500 is reported on a credit report. Anything over $500 is still reported until it is paid and then it is removed. They have also implemented a 12-month waiting period before medical debt can be reported. Thus, giving the borrower a cushion of time in which to get the debt addressed.
A significant portion of medical debt arises from unforeseen and unavoidable circumstances. Many individuals are surprised to find that a debt they believed was covered by insurance or had already settled has unexpectedly appeared on their credit report. At that point, they may lack the necessary funds to resolve the debt and may become engaged in lengthy disputes with their insurance providers.
There are several states that have enacted their own legislation to remove medical debt completely from credit reports. Those being California, Colorado, Connecticut, Illinois, Minnesota, New Jersey, New York, Rhode Island, Virgina and most recently Maine and Oregon.
The decision is currently on hold until at least August when additional considerations will be addressed. However, given the CFPB’s recent position, it is anticipated that the ruling may be vacated, and medical debt reporting is likely to continue as it currently stands.