Medical debt is a struggle for millions of Americans, and recent moves from a federal government watchdog to help people tackle it are up in the air right now.
The Consumer Financial Protection Bureau (CFPB) issued new regulations at the start of the year, but the fate of the CFPB and its regulations are now uncertain.
“Your credit report is that report card that shows financial institutions, lenders, anyone that’s going to give you money. This is why it’s your report card to prove, ‘I’m good for it,’” said financial coach Maureen Paley.
Credit reports are critical to financing many aspects of American life, like owning a home, a car or starting a business. But for the millions of Americans with medical debt, reaching those goals could be harder.
“Medical debt has been getting in the way of folks getting approved for financing either completely or approved at reasonable terms,” said Paley.
In early January, in the final days of the Biden administration, the CFPB announced new regulations barring medical debt from credit reports, effective March 17, 2025.
The CFPB workforce was ordered to stop working by acting director Russ Vought in February after President Donald Trump took office.
Paley says there’s concern the new rule could be reversed.
“They could remove that order, which would again be a burden. We would bring the burden back to the consumers and the everyday consumers that incur this medical debt and have a hard time getting out of it,” said Paley. “And, it would benefit those organizations that benefit from people being in those debts.”
Paley says medical debt is the cause of 60% of bankruptcies. The new regulation could open doors to people struggling with it.
The change is estimated to raise credit scores by an average of 20 points or so.
“Twenty points can save you tens of thousands of dollars…A 20-point difference on your credit score could be the difference between you getting financing at an exorbitant high interest cost or one at a more moderate interest cost. It could also be the difference between you getting approved at all,” said Paley.
The CFPB website is back up and running after a brief shutdown last month coinciding with the stop-work order and the Consumer Complaint Database is still online, but there may be no one available to take those complaints or help.
Paley has advice for people managing medical debt.
“One thing I would suggest is call the entity that’s issuing the debt and understand, one, where the debt came from,” said Paley.
Get the details of the charge and call the provider for “charity care” to try and get the debt reduced. You can also ask them to negotiate the debt.
Keep in mind, the credit reports of Californians are safe from most medical debt thanks to a law signed last year by Gov. Gavin Newsom. ABC10