CFPB Urges Oregon Lawmakers to Pass Medical Debt Credit Reporting Ban

The CFPB's Jan. 16 letter, addressed to Sen. Wlnsvey Campos and Rep. Nathan Sosa, urged passage of the state bill as a complement to the agency's Jan. 7 federal rule. The agency said state action "provides support for federal policymaking." The federal ban faces two legal challenges in Texas courts.

"We commend work by states, such as the proposed SB 605, to proactively protect consumers against the harms of medical debt reporting," CFPB General Counsel Seth Frotman wrote. The agency argued that medical debt is "less predictive of future consumer credit performance than other tradelines" and that unpaid medical bills contain "unreliable information."

The letter stressed that federal law does not preempt state medical debt reporting measures, according to the CFPB. The agency pointed to court decisions upholding similar state laws: the First Circuit in 2022 rejected a challenge to Maine's Medical Debt Reporting Act, and the Ninth Circuit in 2023 upheld Nevada's medical debt collection restrictions. Colorado and New York passed comparable legislation in 2023.

The CFPB detailed what it described as systemic problems with medical billing, including opaque pricing that varies by insurance status. The agency said the most common consumer complaints about medical debt collection allege the debt was already paid, does not belong to the consumer, or is otherwise incorrect. Among consumers reporting difficulty paying medical bills, 66 percent acquired their debt from "a one-time or short-term expense arising from an acute medical need," the agency said.

"The purpose of the credit reporting system is to assess credit risk, not to coerce people to pay debts they may not owe," the CFPB wrote. The agency said many consumers first learn of erroneous medical bills in collections when applying for mortgages or car loans, forcing a choice between a lengthy dispute process and paying questionable debts.

Major credit reporting companies have already begun voluntarily removing some medical debt from reports, according to the CFPB. VantageScore eliminated all medical collection data from one scoring model in August 2022, saying it expected the impact on its models' performance "to be minimal for a large segment of the population."

Oregon's SB 605 would codify protections at the state level that mirror the federal rule. The CFPB's letter did not address what would happen to state-level protections if the federal ban were altered through the pending Texas litigation.