Just months after Gov. Bob Ferguson signed a Washington law to keep medical debt off consumers’ credit reports, the Trump administration is looking to block such policies.
The federal Consumer Financial Protection Bureau now says federal law preempts laws like Washington’s. The federal agency’s position is a reversal from the Biden era.
Backers of Senate Bill 5480, which stops collection agencies from reporting medical debt to credit agencies, decried the move.
“Overturning safeguards around medical debt is just another indicator that we have a president that prioritizes cash money to special interests over people,” said state Sen. Marcus Riccelli, D-Spokane, the bill’s sponsor. “And honestly, I don’t get this upset typically, but I’m pretty upset.”
The bureau’s new interpretation of the federal Fair Credit Reporting Act, filed in the Federal Register late last month, doesn’t invalidate Washington’s law, but opens it up to legal challenges.
A spokesperson for Attorney General Nick Brown said his office is tracking the issue.
It comes as many people in Washington and across the country face spiking health care premiums due in part to the end of federal subsidies that help pay for Affordable Care Act coverage. These tax credits were at the center of the government shutdown fight.
Thousands in Washington are expected to forgo health insurance because of the rising premiums. Costs for employer-sponsored plans are also increasing.
Adam Zarrin, of Blood Cancers United, called it “devastating timing.”
“What’s going to happen is that more Americans, more Washingtonians are going to incur medical debt,” Zarrin added. “It will happen.”
Riccelli’s bill passed the Legislature this year with some bipartisan support. It took effect in late July.
In a survey last year from the American Cancer Society, nearly half of cancer patients and survivors reported dealing with medical debt, even though almost all were insured.
About six in 10 Washingtonians say they would struggle to pay an unexpected $500 medical bill, and around the same proportion reported avoiding or altering their medical care because of the cost, according to Northwest Health Law Advocates.
The goal of the new law is to stop debt from hurting residents’ chances of renting an apartment or buying a car, and to remove it as a barrier to people seeking treatment, said Audrey Miller García, the government relations director for Washington at the American Cancer Society.
“This is not debt that they acquired because they were out on a shopping spree,” she said. “They were sick. This is not their fault.”
Over a dozen states have these laws on the books. Others include California, Colorado, Illinois and New York.
In 2022, the Consumer Financial Protection Bureau under then-President Joe Biden issued the opposite guidance of the Trump administration. The federal agency said states could ban medical debt from credit reports. Many states then passed their laws.
The following year, three major credit bureaus voluntarily announced medical debt under $500 would no longer appear on their credit reports.
Separate from the 2022 guidance, the Biden administration finalized a rule this January barring medical debt reporting under some circumstances federally. But industry groups sued, and the new Trump administration declined to defend the new federal policy, so a federal judge in Texas voided it over the summer, ruling that the Consumer Financial Protection Bureau had exceeded its statutory authority.
Now, with Trump in office, the bureau says its own prior interpretation was “manifestly wrong” and “reflected a misguided policy choice that would undermine the credit reporting system and credit markets.”
“The 2022 rule sowed confusion into the credit reporting system by creating a patchwork quilt of federal and state laws competing to govern the marketplace,” states the notice signed by White House budget director Russell Vought, who is also acting director of the Consumer Financial Protection Bureau.
Miller García called it a “full 180.”
In a U.S. Supreme Court decision last year, the conservative majority undercut the power of federal agencies to interpret ambiguous laws, instead leaving that power to the courts.
Meanwhile, Trump is seeking to dismantle the Consumer Financial Protection Bureau entirely within months.
This story was originally published in the Washington State Standard.
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