Contemplating Unpaid Medical Expenses? Consider Racking Up Credit Card Debt?
In a surprising turn of events, the U.S. District Court for the Eastern District of Texas has blocked and vacated the Consumer Financial Protection Bureau's (CFPB) 2025 rule aimed at removing medical debt from credit reports. The ruling, which came in July 2025, found that the CFPB exceeded its authority under the Fair Credit Reporting Act (FCRA) in attempting to prohibit medical debt reporting.
The rule, finalized in January 2025 under the Biden administration, would have significantly impacted millions of Americans. It was estimated to remove an estimated $49 billion in medical debt from the credit files of about 15 million Americans and bar lenders from using medical debt in lending decisions.
The court's decision emphasized that the FCRA preempts state laws and agency rules restricting medical debt reporting. This ruling means that credit reporting agencies can continue including medical debt on credit reports, provided the debt is properly coded to mask sensitive medical details.
Interestingly, after a change in administration, the CFPB shifted position, siding with industry groups against the rule in court, which contributed to the vacatur.
Despite the setback, credit bureaus like Equifax, Experian, and TransUnion independently modified their practices in 2023 to soften the impact of medical debt on credit scoring. They started not reporting debts below $500 and removing paid medical debts from reports.
State legislatures have also passed laws banning medical debt on credit reports, but the federal court ruling emphasizes uniformity under the FCRA which restricts such state laws.
The overturning of the rule means that medical debt will continue to appear on credit reports. This development comes as a blow to many Americans, particularly the uninsured, who are already struggling with the financial strain of medical bills.
Communication is key when dealing with the billing department. If errors are found, contact the billing department to get them removed. It's also advisable to keep a list of all treatments received to help spot billing errors more easily.
If you're having trouble paying your medical bills, try to negotiate a lower amount or a payment plan. Keeping current with your payments can help prevent the bill from being turned over to collections. If medical bills aren't paid after a certain period of time, they may be turned over to a collection agency, which will hurt your credit score.
The best way to pay a negotiated medical bill is by cash, check, or using a credit card without incurring interest. Using a medical credit card with free or cheap financing for a certain period may be desirable, but ensure you can pay it off before the promotional period expires to avoid high finance charges.
The exact time frame for when a medical billing department will turn unpaid bills over to collections varies by hospital and region. However, it's crucial to address any issues promptly to avoid such a situation.
Whether the CFPB will appeal or propose a new approach remains unclear. In the meantime, it's essential to stay vigilant and proactive when dealing with medical bills to protect your credit score.
- The ruling by the U.S. District Court for the Eastern District of Texas has vacated a 2025 rule from the Consumer Financial Protection Bureau (CFPB) aimed at removing medical debt from credit reports, which has consequently resulted in medical debt continuing to appear on credit reports.
- Despite the rule being overturned, credit bureaus like Equifax, Experian, and TransUnion have proactively modified their practices to soften the impact of medical debt on credit scoring, not reporting debts below $500 and removing paid medical debts from reports.
- Struggling with medical bills will still impact personal-finance, as unpaid bills, if not addressed promptly, may be turned over to collection agencies, negatively affecting one's credit score.
- State legislatures have passed laws banning medical debt on credit reports, but these are restricted under the Fair Credit Reporting Act (FCRA), emphasizing uniformity and limiting the impact of state laws on this issue.
- In the midst of these changes, it's important to stay vigilant and proactive when dealing with medical bills, communicating with the billing department to address errors, negotiating lower amounts or payment plans, and paying bills promptly to protect one's personal-finance and credit-score.
