The Trump Administration’s Consumer Financial Protection Bureau (CFPB) is attempting to block state efforts - including those in Connecticut - to shield consumers from the damaging effects of medical debt on their credit reports. The agency issued new guidance this week asserting that the Fair Credit Reporting Act (FCRA) preempts state laws that bar medical debt from appearing on credit reports.

Fifteen states, including Connecticut, currently have such protections in place. The new guidance comes amid growing concern over rising healthcare costs and the potential for millions of Americans to lose health insurance coverage due to the expiration of Affordable Care Act tax credits.

“It’s bad enough that millions of Americans may be priced out of health insurance coverage and end up burdened with medical debt. By trying to invalidate state laws protecting patients, Trump’s CFPB is doubling down on the harm, seeking to allow this medical debt to ruin people’s financial report cards and make it harder for them to get credit, rental housing, and jobs,” said Chi Chi Wu, director of consumer reporting and data advocacy at the National Consumer Law Center.

Wu emphasized that the guidance is not legally binding and called it a reversal from the CFPB’s 2022 stance under President Biden. “The 180-degree about-face is one reason that the new interpretive rule should not have persuasive value,” said Wu.

Wu also criticized the document’s internal logic. “The new CFPB guidance criticized the Biden-era 2022 interpretive rule by stating that it ‘was unnecessary for the Bureau in 2022 to opine on the scope of preemption under the FCRA.’ Then the Trump-era CFPB proceeds to spend the rest of the guidance opining on the scope of preemption under the FCRA, the very thing it criticizes.”

Even if the Trump CFPB’s interpretation were upheld, states would still have tools to protect residents from harmful health-related financial consequences. “States can pass laws prohibiting creditors, landlords and employers from taking medical debt on credit reports into consideration when making decisions,” said Wu. “States can also require healthcare providers to include clauses in their contracts with debt collectors that prohibit the collectors from reporting the debts to a credit bureau.”