| Entities | Connecticut (4) |
| Topics and Issues | FCRA Rulemaking (13) Medical debt (39) Preemption (11) |
On April 11, 2024, the CFPB sent letter to Sen. Matt Lesser (D), the chair of the Human Services Committee about hat state’s medical debt ban bill, S.B. 395. The letter was signed by Brian Shearer, the CFPB’s Assistant Director, Office of Policy Planning and Strategy.
The letter takes a predictable path:
The role of states:
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- “Commend[ing] work by states…to proactively protect…consumers against the harms of medical debt reporting.
- “States play a frontline role in protecting consumers from unscrupulous practices, including by enacting laws that go further than or reinforce federal protections.”
- “[S]trong state action provides support for federal policymaking.” See, Colorado and New York.
- “[T]he CFPB welcomes and encourages state legislatures to pass laws reinforcing or exceeding the consumer protections of existing federal laws and regulations.”
Preemption
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- “The preemption of state law is narrow under both” the FCRA and FDCPA, and “states may, for instance, prohibit or limit the inclusion of information about a person’s allegedly unpaid medical bills on consumer reports.”
- In 2022, the “CFPB issued an interpretive rule explaining that, with limited exceptions, states are permitted to enact state-level laws that provide consumer protections involving consumer reporting, including regarding the content of information contained in consumer reports or furnished to consumer reporting agencies, in addition to those provided by the federal FCRA. In particular, this interpretive rule stated that state laws prohibiting furnishers from furnishing information about medical debt to consumer reporting agencies would generally not be preempted.” (citations omitted).
Medical debt
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- FCRA rulemaking to “to prohibit credit bureaus from providing such information to creditors for use in underwriting, given the limited predictive value of this information and its use by debt collectors to coerce people to pay bills they may not owe.”
- “Medical debt is categorically different from most types of consumer tradelines that typically appear on consumer reports. Consumers frequently incur medical bills in unique circumstances that differ from other forms of credit extension, and CFPB research has found that medical debt is less predictive of future consumer credit performance than other tradelines.”
- “In addition to being less predictive of credit risk, unpaid medical bills are rife with unreliable information.”
- “Recent action by the national consumer reporting companies implicitly supports the research findings that medical billing history has limited predictive value in underwriting.”
- “The purpose of the credit reporting system is to assess credit risk, not to coerce people to pay debts they may not owe.”
CDIA and debt collectors
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- “The industry lobby has unsuccessfully argued that the FCRA preempts state laws that impose additional requirements on consumer reports, contending among other things that failing to include medical debt would make consumer reports less accurate or reliable. Consistent with our interpretive rule, these arguments have been unsuccessful in court, and are contradicted by longstanding CFPB research showing that medical debt is less predictive of future consumer credit performance than other tradelines typically found on consumer reports and that unpaid medical bills are rife with unreliable information.” (citing CDIA briefs, among others).
- In CDIA v. Frey, the First Circuit “rejected a challenge to Maine’s Medical Debt Reporting Act.” In June 2023, in Aargon Agency, Inc. v. O’Laughlin, the Ninth Circuit Court of Appeals denied a challenge to Nevada Senate Bill 248—which restricts the collection of medical debt—on the grounds that the legislation was not preempted by federal law.” (citations omitted).