The CFPB threw its support behind Massachusetts House Bill 3503 and Senate Bill 1878, which would prohibit medical creditors, debt collectors, and consumer reporting agencies from including medical debt information on consumer reports. General Counsel Seth Frotman wrote to state legislators on January 14, 2025, commending the proposed legislation and arguing that federal law does not preempt such state-level consumer protections.
According to the CFPB letter, medical debt is "categorically different" from other consumer tradelines because consumers frequently incur medical bills through unexpected emergencies and face "opaque pricing" that varies based on insurance status and provider billing practices. Frotman noted that 66 percent of consumers with medical bill problems acquired their debt from "a one-time or short-term expense arising from an acute medical need," and that unpaid medical bills are "rife with unreliable information" with consumers commonly complaining that debts were already paid or don't belong to them.
The bureau's backing comes just one week after it finalized a federal regulation on January 7, 2025, that bans medical bills from credit reports used by lenders and prohibits lenders from using medical information in lending decisions. However, that regulation has already faced legal challenges, with the CFPB noting it has been sued twice in Texas over the rule.
Massachusetts would join Colorado and New York, which passed similar legislation in 2023 to bar medical bills from consumer reports. The CFPB cited successful court defenses of state medical debt laws, including the First Circuit's 2022 decision in Consumer Data Industry Association v. Frey upholding Maine's Medical Debt Reporting Act and the Ninth Circuit's 2023 decision in Aargon Agency, Inc. v. O'Laughlin rejecting a challenge to Nevada's medical debt collection restrictions.
"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 in the letter. He argued that consumers often discover erroneous medical bills in collections only when applying for major loans, forcing them to choose "between a protracted fight to address the inaccuracy, often while recovering from serious illness, or to pay it without ample time to review."
The industry has argued that excluding medical debt would make consumer reports less accurate, but the CFPB dismissed these claims as contradicted by research showing medical debt is less predictive of future credit performance. The bureau noted that VantageScore, a major credit scoring company, eliminated medical collection data from one of its models in August 2022 and expected "minimal" impact on performance "for a large segment of the population."
The Massachusetts bills represent part of a broader state-level movement to restrict medical debt reporting that the CFPB sees as supporting its federal regulatory efforts. The bureau emphasized that states play a "frontline role" in consumer protection and that federal preemption under the Fair Credit Reporting Act is narrow, allowing states to enact laws that go beyond federal protections.