Federal Action Puts State Medical Debt Protections at Risk

The Consumer Financial Protection Bureau (CFPB) has issued an interpretative rule that could make it harder for states to protect people from medical debt — claiming that federal law preempts state bans on reporting it to credit agencies. While not legally binding, the move invites court challenges to 15 existing state laws. This comes at a time when states should instead be advancing even stronger safeguards to prevent medical debt.

It’s yet another policy choice that puts corporate interests over people’s financial health — and it couldn’t come at a worse time.

A Crisis That’s Already Out of Control

Even before this, the U.S. faced a medical debt crisis: over 100 million people owe money for care they needed but couldn’t afford, often despite having insurance. Black, Latinx, low-income families — and especially women, mothers, and caregivers — bear the heaviest burden.

Rising maternal and reproductive care costs, from prenatal visits to labor and delivery, have made essential care harder to access and are now among the leading drivers of medical debt. Families are often pushed into financial distress just as they’re welcoming a new child. These inequities compound across generations, trapping families in cycles of instability and poor health outcomes.

When Bria became pregnant in 2011, her and her former partner were already struggling with paying their bills.

“I was on Medicaid and it helped me throughout my pregnancy. My baby and I were able to get necessary medical and preventive care because of Medicaid, and thanks to WIC, I was able to buy affordable groceries during this time.”

Medicaid helped her get through more difficult times, particularly when she became a single mother and health care expenses became even more unaffordable. 

“I was always gainfully employed, but due to childcare costs, not making enough money at my job at the time, and suddenly being on my own financially, it was a scary time.

Bria’s story is a reminder of what’s at stake. For millions of mothers and caregivers, affordable, reliable coverage like Medicaid can mean the difference between stability and financial crisis — especially as rising reproductive health costs put care further out of reach.

When a person’s credit score drops because they got sick or had a baby, it’s not a reflection of responsibility — it’s proof of a system that makes health unaffordable and punishes people for getting care.

A Common-Sense Rule That Worked

In January, the Biden-Harris administration finalized a rule that would have removed medical debt from credit reports. While the rule never went into effect, it would have been a common-sense lifeline, protecting people from ruined credit scores due to billing errors, denied claims, and unaffordable costs. Seventy-five percent of voters across party lines supported the removal of medical debt from credit scores, recognizing that this helps families rebuild credit and stability. The CFPB’s announcement in January included estimates that it would lead to an additional 22,000 new affordable mortgage approvals each year and an average credit score increase of up to 20 points for people with medical debt on their credit reports.

When the rule was challenged in court, the new leadership of the CFPB under the Trump administration refused to defend the rule and even joined the credit reporting industry in asking the court to vacate it, which the court did in July 2025.  

Not content to unwind common-sense federal policy with broad support, the CFPB has now gone a step further in saying states should not be allowed to offer these protections to patients, either.

Policy Reversals That Undermine Affordable Care

The CFPB’s move adds to a broader pattern of policies that erode affordable coverage. Over 10 million people are expected to lose Medicaid in the coming years due to cuts and policy changes in the so-called Big Beautiful Bill. The pending expiration of Affordable Care Act (ACA) enhanced premium tax credits could double premiums for more than 20 million people with Marketplace plans and leave another 4 million uninsured — creating a perfect storm where a health care crisis fuels a debt crisis.

The Cost of Medical Debt on Families and the Economy

Medical debt is a leading cause of bankruptcy in the U.S., draining savings and driving inequality. According to The Commonwealth Fund, 40% of people with medical debt deplete their savings, one-third see their credit scores fall, and another third skip essentials like food or rent to pay their bills.

Across party lines, voters agree: no one should face financial ruin for getting sick. Real relief means ensuring affordable care, holding hospitals accountable, and removing medical debt from credit reports — once and for all.

Putting People Over Profit

Community Catalyst and our partners will keep fighting to ensure health care is a right — not a source of debt. We urge policymakers to:

• Address the root causes of medical debt, including reversing the harmful Medicaid cuts and permanently extending the enhanced premium tax credits for people to purchase Marketplace coverage. 
• Pass federal legislation removing medical debt from credit reports.
• Defend and expand state laws that keep families protected from the effects of medical debt on credit reports.
• Hold hospitals and lenders accountable for predatory billing and collection practices.

States like Colorado, which banned medical debt reporting in 2023, prove progress is possible. We encourage states to continue this important work and consider additional protections for people with medical debt to avoid federal preemption claims.  

Know Your Rights

If you’re facing medical bills, ask about charity care or financial assistance — many hospitals are legally required to offer it. And avoid deferred interest medical credit cards, which often hit families with hidden, high-interest charges after the promotional period ends.

Community Catalyst is working with partners nationwide to end these predatory practices and advance greater transparency, fairness, and accountability in the health system.