Medical debt has long been a controversial entry on consumer credit reports, often penalizing individuals for unexpected or unavoidable health-related expenses. While a recent federal court decision struck down a nationwide rule aimed at reducing the impact of medical debt on credit scores, many states are moving forward with their own legislation to restrict or ban the practice.
This evolving landscape is creating a complex patchwork of state-specific protections and compliance requirements for credit reporting agencies, lenders, and consumers alike.
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A Quick Recap: Federal Medical Debt Rule Vacated
On July 11, 2025, Judge Sean D. Jordan of the U.S. District Court for the Eastern District of Texas vacated the Consumer Financial Protection Bureau’s (CFPB) medical debt rule. The case, Cornerstone Credit Union League v. CFPB, challenged the CFPB’s authority to regulate what information can be included in consumer credit reports.
Judge Jordan ruled that the CFPB exceeded its authority under the Fair Credit Reporting Act (FCRA), stating that the Bureau has “no power” to limit credit report content based on state or other external laws. The CFPB consented to vacating the rule, though several consumer advocacy groups attempted to intervene and defend it.
While this decision halts the federal rule, it does not prevent individual states from enacting their own medical debt protections, and many already have.
State-Level Responses: From Restrictions to Full Bans
A growing number of states have passed legislation to protect consumers from the credit impact of medical debt. These actions range from limiting how medical debt can be used in credit decisions to fully banning its appearance on credit reports.
States That Ban Reporting Medical Debt to Credit Bureaus:
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Maine: Enacted LD 558 in June 2024, which bans any reporting of medical debt, even if paid or in repayment.
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Rhode Island: Prohibits hospitals and medical providers from furnishing medical debt to CRAs.
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Oregon: Recently joined the list of states blocking medical debt from appearing on credit reports.
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New York & Colorado: Have laws that prevent the inclusion of medical debt on consumer credit reports.
States That Restrict Use of Medical Debt in Credit Decisions:
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California, Illinois, New Jersey, Virginia: While these states may still allow medical debt to appear on reports, they prohibit lenders from using it to make credit decisions.
States Offering Additional Medical Debt Protections:
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Minnesota: Requires hospitals to screen patients for financial assistance before sending debt to collections.
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Connecticut: Operates a program that buys and forgives medical debt from collectors and hospitals.
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Arizona: Restricts wage garnishment for medical debt collection.
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Delaware & New Jersey: Mandate hospital payment plans and limit monthly out-of-pocket expenses for patients.
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Maryland: Requires hospitals to report on their financial assistance practices and other metrics tied to medical debt.
New Action from Vermont and Washington
Two more states have recently joined the effort to limit medical debt visibility in credit reporting:
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Vermont (SB 27) and Washington (SB 5480):
To comply with these laws, Experian will no longer display identifiable medical debt trades for consumers in these states, effective June 27, 2025.
This move reflects the growing trend of state legislation shaping national credit reporting practices, regardless of federal rulemaking.
What This Means Moving Forward
While the CFPB’s medical debt rule is no longer in effect, momentum at the state level continues to build. The result is a fragmented but expanding web of protections that vary significantly by location. For lenders and credit bureaus, this means increased pressure to maintain state-specific compliance frameworks. For consumers, it may mean greater relief, at least in states that have taken action.
As more states consider similar legislation, and with pressure mounting on federal agencies to revisit consumer credit protections, the way medical debt is handled in credit reporting may continue to evolve in the months and years ahead.
