A Colorado law finds itself at odds with the Trump administration, this time over whether medical debt should be included in people’s credit reports.
The Consumer Financial Protection Bureau said recently that the Biden administration was wrong to remove information about medical debt from credit reports and rescinded a rule that was put in place days before Trump was inaugurated. It argued that the rule risked fracturing the national credit reporting system by allowing each state to create its own standards.
The guidance to include medical information in credit reports was signed by the bureau’s director, Russell T. Vought, who is also the White House budget director.
Colorado lawmakers passed a law in 2023 that forbids the practice, which faces a legal challenge, and now Attorney General Phil Weiser is blasting the change.
Colorado is one of 15 states to have passed legislation to remove many medical bills from the credit reports of their residents.
Earlier this month, the American Collectors Association, the largest trade group for the debt collection industry, and a California-based credit bureau, sued Colorado over its law.
Weiser called the decision to include medical debt in consumers’ credit reports outrageous.
“Medical debt is an often unmanageable or unpredictable challenge that just hits people like a ton of bricks out of nowhere,” said Weiser, a Democrat who is running for governor.
Weiser said it was insult to injury for the guidance to be coming from the consumer protection bureau, which was set up by Congress to protect consumers.
That same agency estimated in a 2022 report that about 12 percent of Coloradans (roughly 700,000) had medical debt in their credit file; the total medical debt for the entire state population was $1.3 billion.
The median balance for an individual was $711, according to the report. But the attorney general said its impact could be far reaching.
“Medical debt can damage or ruin credit records, destroy families’ financial stability, deter seeking needed medical treatment, or lead to bankruptcy,” his office wrote in a brief on the subject in 2023.
“I just feel like including medical debt and credit reports is like kicking people when they're already down,” said Rep. Naquetta Ricks, D-Aurora, one of the law’s co-sponsors. “The long term impacts can be traumatic.”
Ricks said when lawmakers considered the bill they heard many stories of how medical debt compounds people’s financial struggles, trapping families in cycles of debt and stress.
“By keeping it off the credit report, you're not saying that you don't owe the debt, you still have to pay back, but you're just not trapping people in this debt that just, you know, becomes like a noose around their neck,” Ricks said.
“It's disappointing that the Trump administration wants to interfere with the Colorado legislative process,” said Sen. Tony Exum, a Democrat from Colorado Springs, another co-sponsor of the law.
“They seem to be going out of their way to make it more expensive for Coloradans with medical debt,” Exum said. “It's cruel in a way because nobody plans for this.”
CPR did not get a response from the law’s Republican co-sponsor, Rep. Ron Weinberg of Loveland.
The industry perspective
A group representing the consumer reporting industry, including consumer reporting agencies and credit bureaus, applauded the Consumer Financial Protection Bureau’s new rule.
In a statement on its website, the Consumer Data Industry Association said there should be one national standard for how information is provided to consumer reporting agencies and what information can appear on a consumers’ credit report.
Many state legislatures have disregarded the Fair Credit Reporting Act’s plain text and tried to impose state-level limits on how credit reporting agencies report data, the group said. That fragmentation is what Congress aimed to prevent when it reserved authority over “information contained in consumer reports” and the duties of those who furnish information to the agencies.
Allowing divergent state regulation would fragment the consumer-reporting system, which would increase consumers’ borrowing costs, the group said.
The American Collectors Association lawsuit against the state makes similar arguments. The legislature “overlooked the tremendous number of unintended consequences,” the suit states. It said the law harms medical providers and patients by directing credit reporting agencies “to suppress truthful information about unpaid medical bills” from consumers’ credit reports.
