In an April 17, 2026 letter to Representative Brian Mulder, CFPB General Counsel Seth Frotman told the South Dakota legislature that House Bill 1058 would cement important protections against medical bill credit reporting into South Dakota law. The letter is advocacy, not a binding rule, but it signals the agency's position on the federal preemption question that industry groups have raised against similar state laws.
Frotman argued that preemption of state law is narrow under both the Fair Debt Collection Practices Act and the Fair Credit Reporting Act, and that states may prohibit or limit the inclusion of information about a person's allegedly unpaid medical bills on consumer reports. He pointed to a 2022 CFPB interpretive rule stating that state laws prohibiting furnishers from reporting medical debt to consumer reporting agencies would generally not be preempted.
The letter also noted that on January 7, 2025, the CFPB finalized a regulation banning the inclusion of medical bills on credit reports used by lenders and prohibiting lenders from using medical information in lending decisions. Frotman acknowledged the agency has since been sued twice in Texas over that regulation.
On the preemption litigation record, Frotman cited two appellate decisions. In Consumer Data Industry Association v. Frey, the First Circuit in February 2022 rejected a challenge to Maine's Medical Debt Reporting Act, holding that the FCRA does not categorically preempt all state laws governing information in consumer reports. In Aargon Agency, Inc. v. O'Laughlin, the Ninth Circuit in June 2023 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.
Frotman also pushed back on the industry's factual claims. CFPB research, he wrote, shows that medical debt is less predictive of future consumer credit performance than other tradelines and that unpaid medical bills are rife with unreliable information. Among consumers who report problems paying medical bills, 66 percent acquired their debt because of a one-time or short-term expense arising from an acute medical need. He noted that in August 2022, VantageScore, one of the major credit score providers, elected to eliminate all medical collection data from one of its scoring models and noted that it expected the impact on its models' performance to be minimal for a large segment of the population.
The letter closes by noting that Colorado and New York passed legislation in 2023 to bar medical bills from consumer reports, and that several other states have followed or are considering doing so.