The House Financial Services Committee held a hearing yesterday supposedly devoted to “balancing power” and “reprioritizing” consumer protection. Whatever the heck that means, a late-breaking addition to the agenda was a foolish House bill under the Congressional Review Act to erase the Consumer Financial Protection Bureau’s extremely popular, crucially important action removing medical bills from credit reports. At the hearing, Congressman Norman of South Carolina indicated that he and his colleagues are “trying to get [the bill] out of committee.” With a vote possible on the federal measure soon, states should urgently take action on their own pending legislation to protect people from faulty credit reporting of medical bills.
The CFPB rule would protect about 15 million Americans from having nearly $50 billion in medical bills – which are notoriously inaccurate and unhelpful in predicting credit risk – appear on their credit reports. Credit reports serve as economic gatekeepers for millions of Americans seeking to buy a home or a car, start a business, find an apartment, or apply for a job.
The bills introduced in Congress would not only eliminate the CFPB rule, but would prevent the agency from issuing “substantially the same” rule in the future – a catastrophic outcome for consumers as well as businesses that rely on accurate credit reports. It is not totally clear why the bill (also known as a “resolution”) was added to the hearing, especially since the CFPB rule is incredibly popular, with 75 percent of voters supporting removing medical debt from credit reports and 66 percent saying they would favor policymakers who support these efforts. Nonetheless, a parallel resolution has been introduced in the Senate, and voting on both could presumably occur soon.
The good news is that states can improve their residents’ credit reports and contribute to the national effort to solve this problem once and for all. In fact, several states already have. In a visionary step, Colorado in 2023 prohibited consumer reporting agencies from including medical bills on people’s credit reports, and eight other states – including Virginia, California, and New York – have now enacted similar laws, with bipartisan support from the governors of those states. States can take this action without fear of federal law displacing (i.e. “preempting”) state law, and courts have agreed.
Lawmakers across the country have proposed similar legislation to protect people from the reporting of unhelpful, often inaccurate medical bills. The CFPB itself endorsed such legislation in four states (Washington, South Dakota, Massachusetts, and Oregon). Several more state legislatures, such as Maryland’s, are considering similar bills. In addition to offering valuable protections to the citizens of each state, whatever happens in Washington, the total effect of these actions may be greater than the sum of their parts: at some point, consumer reporting agencies will have to decide whether they really want to keep reporting this unhelpful data in a dwindling number of places. The evidence is clear that consumers and businesses alike would benefit.
Given the crucial importance of ensuring that inaccurate credit reports do not hurt people’s prospects, states should act now to finalize these popular protections.