Why Medical Debt Still Shows Up on Most Americans’ Credit Reports.

A federal court in Texas struck down the state’s own ban on reporting medical debt to credit bureaus on 10 August 2026. It is the latest sign that protection from medical debt collection on a US credit report now depends on which state a borrower lives in, not on a single federal rule. The ruling extends a run of defeats for an idea the Consumer Financial Protection Bureau floated in 2025: that medical bills should disappear from credit files nationwide.

A federal ban that lasted six months

The Bureau finalised a rule on 7 January 2025 that would have barred consumer reporting agencies from including medical bills on the reports lenders use. It would have stopped lenders weighing medical information in a credit decision at all, too. The rule was meant to apply in every state, regardless of any local law already on the books.

That rule did not survive six months. In Cornerstone Credit Union League v. CFPB, the US District Court for the Eastern District of Texas vacated it nationwide on 11 July 2025. The court ruled that the Bureau had exceeded the authority Congress gave it under the Fair Credit Reporting Act. The vacatur followed a joint motion from the CFPB and the Consumer Data Industry Association, the trade body for the credit bureaus. The court allowed the National Consumer Law Center to intervene on consumers’ behalf.

The CFPB reversed its own position

Three months later, the Bureau went beyond simply dropping its own rule. In an interpretive rule published in the Federal Register on 28 October 2025, it reversed a position it had held since 2022. It now argued that the Fair Credit Reporting Act’s preemption clause generally stops states, not only the federal government, from barring categories of information such as medical debt from a credit report. The Bureau called its own earlier, narrower reading “manifestly wrong.” The new guidance carries no force of its own. It is not a rule a bank or bureau must follow, and the Bureau itself wrote that courts, not the agency, decide how far preemption reaches.

Texas tested the new argument, and it worked

A court has now tested that argument directly. On 10 August 2026, Judge Robert Pitman of the US District Court for the Western District of Texas ruled in Consumer Data Industry Association v. Texas. Federal law, he found, expressly preempts a narrower Texas statute barring credit bureaus from including certain out-of-network medical collection accounts on a report, and he permanently blocked the state from enforcing it. Pitman declined to defer to either the CFPB’s 2022 or 2025 interpretive rules, citing the US Supreme Court’s instruction that judges reach their own view of what a statute means. He drew a line, too: the credit bureaus had asked him to preempt any state consumer-reporting law regardless of its subject, and he refused to go that far.

Medical debt collection protection now depends on the state

Outside Texas, the picture is mixed rather than settled. Fifteen states and the District of Columbia currently bar or limit medical debt on a credit report. Colorado went first, in 2023, and New York followed the same year. Governor Kathy Hochul signed a law barring hospitals, clinicians and debt collectors from furnishing any part of a medical debt to a credit bureau. Most other states have no such protection at all. For a borrower there, a collection agency taking over an unpaid medical bill can still put it on file with no state or federal shield in the way.

Colorado’s and Minnesota’s own bans are now being challenged in separate federal lawsuits. Both suits come from credit-reporting and debt-collection trade groups, using the same preemption argument that just succeeded in Texas. Whichever way those cases go, the compliance map for lenders and credit bureaus is being redrawn state by state, not read off one federal rule.

What it means for lenders, fintechs and borrowers

The fight over what belongs on a credit report is not confined to medical debt. Fintechly has reported separately on the opposite debate playing out over buy now, pay later loans, where regulators and scoring companies are weighing whether to add a new category of debt to US credit files rather than remove one.

For lenders serving borrowers who lack a conventional credit history, the uncertainty sits alongside a related problem Fintechly has covered: how alternative data is narrowing America’s credit-invisible gap. A medical collection account is one of the more common reasons a thin file turns into a damaged one.

A fuller list of lenders and credit infrastructure providers working in this space is on Fintechly’s lending sector directory.