CFPB General Counsel Seth Frotman wrote to the Washington state legislature in support of SB 5480 and HB 1632, which would bar furnishing medical debt information to consumer credit reporting agencies and prevent those agencies from including medical debt on consumer reports.
"We commend work by states, such as the proposed SB 5480 and HB 1632, to proactively protect consumers against the harms of medical debt reporting," Frotman wrote. He argued that the Fair Credit Reporting Act narrowly preempts state law and permits states to ban medical debt reporting.
The letter cites the bureau's final rule prohibiting lenders from using medical information in credit decisions and banning medical bills from credit reports used by lenders. That rule has been challenged in two Texas lawsuits since its finalization, according to the CFPB.
Frotman wrote that medical debt has "limited predictive value" and is used "by debt collectors to coerce people to pay bills they may not owe." Among consumers who report problems paying medical bills, 66 percent acquired their debt from one-time or short-term expenses from acute medical needs, according to CFPB research.
Among consumers complaining about medical bill collection, the most common allegations are that the debt was already paid, belongs to someone else, or is otherwise incorrect, according to bureau research.
"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.
The Washington proposals follow similar legislation passed in Colorado and New York in 2023, with several other states considering comparable measures, according to the CFPB. Federal courts have rejected industry challenges to state medical debt reporting restrictions, including the First Circuit's 2022 decision in Consumer Data Industry Association v. Frey, which upheld Maine's Medical Debt Reporting Act, and the Ninth Circuit's 2023 ruling in Aargon Agency, Inc. v. O'Laughlin, which affirmed Nevada's medical debt collection restrictions.