CFPB Letter to Washington State Legislature on Barring Medical Bills on Credit Reports
The Honorable Marcus Riccelli and the Honorable Joe TimmonsLegislative Building416 Sid Snyder Ave SWOlympia, WA 98504 Dear Senator Riccelli and Representative Timmons, I write on behalf of the Consumer Financial Protection Bureau (CFPB) regarding SB 5480 and HB 1632, which would, among other things, prohibit the furnishing of information regarding medical debt in Washington to a consumer credit reporting agency and prohibit consumer reporting agencies from including information concerning medical debt on consumer reports. We commend work by states, such as the proposed SB 5480 and HB 1632, to proactively protect consumers against the harms of medical debt reporting. States play a frontline role in protecting consumers from unscrupulous practices, including by enacting laws that go further than or reinforce federal protections. The preemption of state law is narrow under both the Fair Debt Collection Practices Act (FDCPA) and the Fair Credit Reporting Act (FCRA), and states may, for instance, prohibit or limit the inclusion of information about a person’s allegedly unpaid medical bills on consumer reports. In 2022, the CFPB issued an interpretive rule explaining that, with limited exceptions, states are permitted to enact state-level laws that provide consumer protections involving consumer reporting, including regarding the content of information contained in consumer reports or furnished to consumer reporting agencies, in addition to those provided by the federal FCRA.1 In particular, this interpretive rule stated that state laws prohibiting furnishers from furnishing information about medical debt to consumer reporting agencies would generally not be preempted.2 On January 7, 2025, the CFPB finalized a regulation that bans the inclusion of medical bills on credit reports used by lenders and prohibits lenders from using medical information in their lending decisions, given the limited predictive value of this information and its use by debt collectors to coerce people to pay bills they may not owe.3 (The CFPB has thereafter been sued twice in Texas on this regulation.4) As we have seen in so many other contexts, strong state action provides support for federal policymaking. SB 5480 and HB 1632 would cement important protections against medical bill credit reporting into Washington law. This legislation aligns with recent efforts by several states to protect consumers against medical debt reporting. In 2023, Colorado and New York passed legislation to bar medical bills from appearing on consumer reports, and several other states have followed suit or are considering doing so. The industry lobby has unsuccessfully argued that the FCRA preempts state laws that impose additional requirements on consumer reports, contending among other things that failing to include medical debt would make consumer reports less accurate or reliable.5 Consistent with our interpretive rule, these arguments have been unsuccessful in court, and are contradicted by longstanding CFPB research showing that medical debt is less predictive of future consumer credit performance than other tradelines typically found on consumer reports and that unpaid medical bills are rife with unreliable information. In February 2022, in Consumer Data Industry Association v. Frey, the First Circuit Court of Appeals rejected a challenge to Maine’s Medical Debt Reporting Act—which among other things restricts when consumer reporting agencies may report medical bills—on the grounds that the FCRA does not categorically preempt all state laws governing information contained in consumer reports.6 Similarly in June 2023, in Aargon Agency, Inc. v. O’Laughlin, the Ninth Circuit Court of Appeals denied a challenge to Nevada Senate Bill 248—which restricts the collection of medical debt—on the grounds that the legislation was not preempted by federal law.7 Accordingly, the CFPB welcomes and encourages state legislatures to pass laws reinforcing or exceeding the consumer protections of existing federal laws and regulations. These arguments against state laws that provide protection with respect to the collection and reporting of medical bills are also mistaken as a factual matter. Medical debt is categorically different from most types of consumer tradelines that typically appear on consumer reports.
