In January 2025, the Consumer Financial Protection Bureau (CFPB) issued a final rule banning the inclusion of medical debt on credit reports. The rule prohibits lenders from using medical debt information in credit eligibility determinations and prevents credit bureaus from including medical debt in credit reports and scores shared with lenders. It was scheduled to take effect in March 2025, but a federal court issued a 90-day stay in response to a lawsuit filed by credit and consumer reporting industry representatives, postponing the rule’s effective date to June 15. Amid this pending litigation, a Congressional Review Act resolution introduced in the House and Senate, if enacted, would stop the CFPB rule from taking effect and prevent future reissuance of a rule “in substantially the same form” unless specifically authorized by new legislation.
The debate over the CFPB rule follows significant changes in credit reporting practices, including decisions by the national credit reporting agencies in 2023 to remove all unpaid medical debt items under $500 from credit reports and the exclusion of medical debt as a factor in VantageScores in 2023. These changes more than halved the number of consumers with medical debt on their credit records and were linked to increased credit scores, potentially expanding consumers’ access to credit and insurance on more favorable terms. In 2023, Colorado and New York became the first of nine states to remove all medical debt from credit reports.
In this analysis, we use the Urban Institute’s August 2024 credit bureau data to estimate the share of consumers in each state and congressional district with any medical debt in collections on their credit reports and who would therefore benefit if the CFPB rule takes effect. We do not observe medical debt on credit records in Colorado and New York because of their 2023 state laws, but our data were collected before similar laws took effect in California, Connecticut, Illinois, Minnesota, New Jersey, Rhode Island, and Virginia. We find the following:
- Nearly 10 million consumers had medical debt in collections on their credit reports in August 2024. This number includes consumers in the seven states where bans on credit reporting of medical debt had not yet taken effect at the time of data collection. The CFPB rule would eliminate medical debt from all consumer credit records shared with lenders.
- The prevalence of medical debt varied widely across states and congressional districts. Oklahoma had the highest state prevalence of medical debt (8.8 percent). In 16 congressional districts, at least 1 in 10 consumers had medical debt, with the highest rates found in districts in Texas and Tennessee.
Variation in Medical Debt by State and Congressional District
In August 2024, 4.1 percent of consumers had medical debt in collections on their credit records, representing approximately 9.7 million consumers nationwide, down from about 27 million consumers in August 2022 before the removal of medical collections under $500 from credit reports. At the state level, the share of consumers with medical debt in 2024 ranged from a low of 0 percent in Colorado and New York to a high of 8.8 percent in Oklahoma (see appendix table below). The median amount owed among those with medical debt in collections was $1,465, which was largely consistent with the median amount observed for the previous year (data not shown).
We observed wide variation in medical debt across the nation’s 435 congressional districts and the District of Columbia (figure 1). We found the highest prevalence of medical debt in the 13th and 15th districts in Texas (15.1 percent and 12.2 percent, respectively) and the 9th district in Tennessee (12.2 percent).
In approximately 1 in 4 districts, the share of consumers with medical debt in collections on their credit records was below 2 percent, while over one-third (34 percent) of districts had a medical debt prevalence of 5 percent or more, and the prevalence of medical debt in the remaining 41 percent of districts was between 2 and 5 percent. In 16 districts, at least 10 percent of consumers had medical debt in collections; 10 of these districts are in Texas. Among the 50 districts with the highest rates of medical debt, 37 are in states that have not adopted the Affordable Care Act’s Medicaid expansion.
Implications of the CFPB Rule for Consumers
A federal rule to eliminate medical debt from credit reports used by lenders would affect millions of consumers who did not have their debt removed under previous changes in credit reporting practices. Its impact would vary widely by state and congressional district.
In issuing its final rule, the CFPB estimated the policy change would increase the credit scores of consumers with medical debt by an average of 20 points and expand access to affordable mortgages for 22,000 consumers annually. It also highlighted research showing medical debt that appears on credit reports is a poor predictor of creditworthiness, often because the information is unreliable and reflects errors and complexities in health care billing and insurance reimbursement practices. Consumers also typically lack control over whether they incur medical debt, unlike voluntary decisions to take out a home or auto loan. The removal of medical debts could therefore increase credit access while improving the functioning of credit markets.
Because the CFPB rule would not affect the underlying debt that consumers owe to health care providers, they could still face other penalties for nonpayment, including civil lawsuits that can lead to wage garnishment, seizure of bank account funds, or other consequences. Some policymakers and researchers have raised concerns that removing medical debt from credit reports would reduce consumers’ incentives to pay medical bills, potentially weakening hospitals’ financial stability or causing providers to increase demands for upfront payment, encourage payment with medical credit cards, or avoid providing care to individuals they perceive as unlikely to pay. Further research is needed to assess how provider and consumer behaviors and experiences have changed in states that recently enacted laws similar to the CFPB rule and whether these concerns are warranted.
How Emerging Policies Could Impact Medical Debt
As policymakers debate whether to uphold the CFPB rule, other emerging policy developments could have important implications for the nationwide prevalence of medical debt, regardless of whether that debt appears on credit reports. Congressional leadership is considering a range of policies to reduce funding for Medicaid through per capita funding caps, reductions in federal matching funds to states, and establishment of work requirements. Previous evidence found the Affordable Care Act’s Medicaid expansion significantly reduced medical debt, suggesting new proposals to cut Medicaid could reverse that progress. Efforts to reduce access to Medicaid could also coincide with the scheduled expiration of enhanced Marketplace premium tax credits in 2026. The combined effect of these policies would include a substantial increase in the number of people who are uninsured and who receive medical bills they cannot afford to pay, undermining the health and well-being of patients and placing greater financial strain on hospitals, health clinics, and other providers.
