The letter said the bill "would cement important protections against medical bill credit reporting into South Dakota law" and aligns with measures passed by Colorado and New York in 2023.
Frotman 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" by the Fair Credit Reporting Act or the Fair Debt Collection Practices Act.
On Jan. 7, 2025, the CFPB finalized a regulation banning medical bills from credit reports used by lenders and barring lenders from using medical information in credit decisions. The letter noted that "the CFPB has thereafter been sued twice in Texas on this regulation."
The letter cited the First Circuit's February 2022 decision in Consumer Data Industry Association v. Frey, which rejected a challenge to Maine's Medical Debt Reporting Act, and the Ninth Circuit's June 2023 ruling in Aargon Agency, Inc. v. O'Laughlin, which denied a challenge to Nevada Senate Bill 248 restricting medical debt collection.
Frotman wrote that CFPB research shows medical debt "is less predictive of future consumer credit performance than other tradelines" and that unpaid medical bills are "rife with unreliable information." The letter said 66 percent of consumers reporting problems paying medical bills "acquired their debt because of a one-time or short-term expense arising from an acute medical need."
The letter cited VantageScore's August 2022 decision to remove medical collection data from one of its scoring models. VantageScore said it expected the impact on the model's performance "to be minimal for a large segment of the population." The national consumer reporting companies announced in March 2023 they would stop reporting some medical bills.
"The purpose of the credit reporting system is to assess credit risk, not to coerce people to pay debts they may not owe," Frotman wrote. He said debt collectors "have many other legal remedies to collect legitimate medical bills without resorting to coercive credit reporting."
Frotman closed by saying states "have long been valued and critical partners in establishing and fortifying protections for consumers."