NEW YORK CITY, New York: The Trump administration is preparing to strike down state laws that shield consumers' credit reports from medical debt, in a move that would centralize credit reporting standards nationwide and reverse several Biden-era protections.

A new interpretive rule drafted by the Consumer Financial Protection Bureau (CFPB) says the Fair Credit Reporting Act (FCRA) should override any state-level regulations governing how debts, including medical bills, are reported to major credit bureaus like Experian, Equifax, and TransUnion.

The proposal would effectively invalidate laws in states such as New York and Delaware, which currently ban the reporting of medical debt on credit files. Those restrictions were enacted after the three national credit bureaus agreed in 2023 to stop listing unpaid medical debts under US$500, a move that erased roughly 70 percent of medical debt records from consumer credit reports.

The new interpretation marks a sharp policy reversal from the Biden administration, which had allowed states to expand consumer protections under federal law. The CFPB, now operating primarily to roll back previous regulations, said Congress intended the FCRA to establish uniform national standards and that state laws restricting reporting "run afoul of that intention."

Medical debt is among the most frequently disputed items on credit reports, often stemming from delayed insurance reimbursements or unpaid bills for procedures already completed. Analysts say such debts can damage consumers' ability to qualify for mortgages, car loans, or credit cards, even when the bills are eventually resolved.

According to the Kaiser Family Foundation (KFF), Americans collectively owe about $220 billion in medical debt, with the burden falling most heavily in Republican-led states such as Mississippi, West Virginia, Georgia, and South Dakota, where one in six residents carries overdue medical bills.

Critics of the CFPB's move say it could discourage states from pursuing consumer protections, while supporters argue that uniform reporting rules will make credit data more consistent nationwide.

A CFPB spokesperson did not immediately respond to a request for comment.