Medical Debt: The $140 Billion Crisis Destroying Credit Scores—and How to Fight Back
$140B in medical debt affects 100M Americans. CFPB rule struck down July 2025. No Surprises Act still protects. Complete guide to dispute bills, protect credit, fight collectors.
By Compens.ai Editorial Team
Insurance Claims Expert
Medical Debt: The $140 Billion Crisis Destroying Credit Scores—and How to Fight Back
Updated: December 2025
The Healthcare Bill That Ruins Lives
One in five Americans has medical debt in collections. The total burden: an estimated $140 billion—more than auto loans and credit card debt combined for millions of families. Medical emergencies don't just threaten your health; they threaten your financial future.
Unlike other debts, medical debt is uniquely cruel: you often can't choose the provider, can't negotiate the price in advance, and may not even know what you'll owe until months after treatment. Then the bill arrives—often wildly inflated, sometimes for services you never received, frequently for amounts your insurance should have covered.
The federal government tried to help. In January 2025, the CFPB finalized a rule to remove $49 billion in medical bills from the credit reports of 15 million Americans. But in July 2025, a federal judge struck the rule down. The protection vanished overnight.
This guide explains your rights under current law, the protections that still exist, and exactly how to fight unfair medical debt.
Medical Debt by the Numbers
| Statistic | Figure | |-----------|--------| | Americans with medical debt | 100 million+ | | Total medical debt in collections | $140 billion | | CFPB rule (struck down) would remove | $49 billion | | Americans affected by struck-down rule | 15 million | | States with medical debt credit bans | 13 states | | Average medical debt in collections | $2,500 | | Medical debt bankruptcy rate | 66% of bankruptcies |
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Understanding Your Medical Debt Rights
The No Surprises Act (Still in Effect)
Despite the CFPB rule's demise, the No Surprises Act remains powerful federal protection against certain medical bills:
What's Covered:
Emergency services: You cannot be balance billed for emergency care at out-of-network facilities. The provider must accept in-network rates.
Out-of-network providers at in-network facilities: If you go to an in-network hospital but are treated by an out-of-network doctor (anesthesiologist, radiologist, etc.), you're protected from surprise bills.
Air ambulance services: Protected from balance billing by out-of-network air ambulance providers.
What You Pay:
Under the No Surprises Act, for protected services you pay only:- •Your in-network cost-sharing amount (deductible, copay, coinsurance)
- •Calculated as if the provider was in-network
- •Providers cannot bill you for the difference
How to Enforce It:
If you receive a surprise bill that violates the No Surprises Act:- •Contact the provider and cite the No Surprises Act
- •File a complaint with CMS: cms.gov/nosurprises
- •Contact your state insurance commissioner
- •Note: Illegal bills should NOT appear on credit reports
Credit Bureau Voluntary Protections
While not legally binding, the three major credit bureaus (Equifax, Experian, TransUnion) have voluntarily implemented protections:
Currently in effect (as of April 2023):- •Medical debt under $500 removed from credit reports
- •Paid medical debt removed from credit reports
- •One-year waiting period before medical debt can appear
- •These are voluntary policies, not law
- •Credit bureaus can change policies at any time
- •Medical debt over $500 still affects your credit
- •Debt collectors may still pursue payment
State Protections
Thirteen states have enacted their own medical debt credit reporting bans:
| State | Protection | Effective | |-------|------------|-----------| | California | Bans medical debt from credit reports | 2025 | | Colorado | Strong medical debt protections | 2023 | | New York | Medical debt collection limits | 2024 | | Arizona | Credit reporting ban | 2024 | | Nevada | Medical debt protections | 2024 | | New Mexico | Comprehensive protections | 2024 | | Minnesota | Credit reporting restrictions | 2024 | | Oregon | Medical debt reforms | 2024 | | Connecticut | Collection restrictions | 2024 | | Illinois | Credit reporting limits | 2025 | | Maryland | Comprehensive reform | 2025 | | Vermont | Medical debt protections | 2025 | | Massachusetts | Collection reforms | 2025 |
However: In October 2025, the CFPB issued guidance stating that federal law (FCRA) preempts state laws on credit reporting. This has created legal uncertainty about state protections—litigation is ongoing.
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The CFPB Rule: What Happened
What the Rule Would Have Done
In January 2025, the CFPB finalized a rule that would have:
- •Banned medical bills from credit reports used by lenders
- •Prohibited lenders from using medical information in lending decisions
- •Removed an estimated $49 billion in medical bills
- •Helped approximately 15 million Americans
- •Medical debts provide little predictive value about ability to repay
- •Medical bills are frequently inaccurate
- •Many charges should have been covered by insurance or financial assistance
- •Medical emergencies are involuntary—unlike credit cards or car loans
Why It Was Struck Down
On July 12, 2025, a federal judge struck down the rule, finding that the Fair Credit Reporting Act did not authorize the CFPB to ban medical debt from credit reports.
The industry argument: Credit bureaus and lenders argued that consumers have a right to know about all debts, and lenders have a right to consider all relevant financial information.
The consumer argument: Medical debt is fundamentally different from other debts—it's involuntary, often inaccurate, and doesn't predict future credit behavior.
Current status: The rule is not in effect. Appeals may be filed, and Congress could pass legislation to achieve similar goals, but for now, medical debt over $500 can appear on credit reports.
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Common Medical Billing Problems
Billing Errors Are Epidemic
Studies consistently find that 30-80% of medical bills contain errors. Common problems include:
Duplicate charges: Being billed twice for the same service
Unbundling: Separating services that should be billed together at lower rates
Upcoding: Billing for a more expensive service than was provided
Phantom charges: Bills for services never received
Wrong patient: Being billed for someone else's care
Insurance not applied: Bills for amounts your insurance should cover
Surprise Bills (Beyond the No Surprises Act)
The No Surprises Act doesn't cover everything. You can still face surprise bills for:
Scheduled procedures at out-of-network facilities: If you knowingly choose out-of-network care
Ground ambulance services: Notably excluded from federal protections
Certain facility fees: "Facility fees" for outpatient visits can be hundreds of dollars
Services you consented to waive protections for: Some providers require waivers
Collection Agency Abuses
Medical debt collectors frequently violate the law:
Common violations:- •Collecting on debts you don't owe
- •Failing to provide required validation notices
- •Threatening legal action they can't take
- •Reporting debts without proper verification
- •Harassing phone calls
- •Attempting to collect time-barred debts
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How to Fight Medical Debt: Step-by-Step
Step 1: Request an Itemized Bill
Never pay a medical bill without reviewing an itemized statement. Request:
- •Detailed itemization of all charges
- •Procedure codes (CPT codes)
- •Diagnosis codes (ICD-10 codes)
- •Date of each service
- •Provider name for each charge
- •Charges for days not in hospital
- •Services you don't remember receiving
- •Duplicate charges
- •Medications you didn't take
- •Procedures that were canceled
Step 2: Review Your Explanation of Benefits (EOB)
Compare the bill to your insurance company's EOB:
- •What did insurance pay?
- •What's your responsibility?
- •Were any charges denied?
- •Do the amounts match the provider's bill?
If amounts don't match: Contact both the provider and insurance company to resolve discrepancies.
Step 3: Check for Financial Assistance
Most nonprofit hospitals are required to offer financial assistance:
Hospital charity care:- •Nonprofit hospitals must have financial assistance policies
- •Many will reduce or forgive bills based on income
- •Ask for a financial assistance application
- •You may qualify even with income above poverty level
- •Medicaid (if you qualify)
- •Hospital sliding scale programs
- •Drug manufacturer assistance programs
- •State and local assistance programs
- •Ask for the "self-pay" rate (often 50-70% lower)
- •Offer lump sum payment for discount
- •Request interest-free payment plan
- •Many hospitals will negotiate
Step 4: Dispute Errors
If you find billing errors:
With the provider:- •Send written dispute explaining the error
- •Include supporting documentation
- •Request investigation and correction
- •Ask for corrected bill
- •Appeal denied claims
- •Provide medical records supporting necessity
- •Request external review if internal appeal fails
- •Dispute inaccurate medical debt
- •Credit bureaus must investigate within 30 days
- •Debt must be verified or removed
- •File online at each bureau's website
Step 5: Know Your Rights Against Collectors
If your debt goes to collections:
Debt validation:- •You have 30 days to request validation
- •Collector must prove you owe the debt
- •They cannot continue collection until validated
- •Medical debt has time limits for lawsuits
- •Varies by state (3-10 years typically)
- •Old debt may be "time-barred"
- •Making a payment can restart the clock
- •You can demand collectors stop calling
- •Must be in writing
- •They can still sue, but can't harass
- •No calls before 8am or after 9pm
- •No calling at work if you ask them to stop
- •No threats of action they can't take
- •No discussing your debt with others
- •No false or misleading statements
Step 6: Consider Your Options for Unaffordable Debt
If you genuinely cannot pay:
Payment plans:- •Many providers offer interest-free plans
- •Negotiate affordable monthly amounts
- •Get agreement in writing
- •Offer lump sum for less than full amount
- •Collectors often accept 25-50% of balance
- •Get agreement in writing before paying
- •Forgiven debt may be taxable income
- •Medical debt is dischargeable in bankruptcy
- •Chapter 7 may eliminate all debt
- •Chapter 13 creates payment plan
- •Consult bankruptcy attorney
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Protecting Your Credit
Check Your Credit Reports
Review your reports from all three bureaus for medical debt:
- •AnnualCreditReport.com (free weekly access)
- •Look for medical collections
- •Check amounts and dates
- •Verify the debt is yours
- •Check for debts under $500 (should be removed)
Dispute Inaccurate Medical Debt
If you find errors on your credit report:
What to dispute:- •Debts you don't owe
- •Incorrect amounts
- •Debts under $500
- •Paid debts still showing
- •Debts within the one-year waiting period
- •Debts violating the No Surprises Act
- •File dispute online with each credit bureau
- •Include supporting documentation
- •Credit bureau has 30 days to investigate
- •Debt must be verified or removed
- •File complaint with CFPB if not resolved
Understanding Credit Impact
How medical debt affects your score:- •Collections can drop scores 50-100+ points
- •Impact decreases over time
- •Newer scoring models (FICO 9, VantageScore 4.0) weigh medical debt less
- •Some lenders use older models
- •Pay before debt goes to collections (typically 90-180 days)
- •Dispute any inaccuracies immediately
- •Consider paying small amounts to remove from credit
- •Request "pay for delete" agreements
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Filing Complaints
If Your Rights Are Violated
Consumer Financial Protection Bureau (CFPB)- •Medical debt collection complaints
- •Credit reporting errors
- •consumerfinance.gov/complaint
- •Debt collector violations
- •Deceptive practices
- •reportfraud.ftc.gov
- •State law violations
- •Pattern of abuse
- •naag.org (directory)
- •Insurance claim denials
- •No Surprises Act violations
- •naic.org (directory)
- •No Surprises Act violations
- •cms.gov/nosurprises
Documentation to Keep
For any medical debt dispute, maintain:
- •All bills and statements
- •Explanation of Benefits (EOB) from insurance
- •Written communications with providers
- •Written communications with collectors
- •Payment records
- •Credit report copies
- •Complaint confirmations
- •Notes from phone calls (date, time, person, content)
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The Bigger Picture: Medical Debt and Inequality
Who Carries Medical Debt
Medical debt doesn't affect everyone equally:
Demographics most affected:- •Black Americans (28% have medical debt vs. 17% white)
- •Low-income households
- •Uninsured and underinsured
- •Those with chronic conditions
- •Residents of states that didn't expand Medicaid
Systemic Problems
Why medical debt is so common:
Opaque pricing: Hospitals don't disclose prices before treatment
Insurance complexity: Confusing networks, prior authorizations, denials
High deductibles: Average deductible now exceeds $1,600
Billing errors: Rampant inaccuracies in medical billing
Collection practices: Quick referral to collections
Lack of assistance awareness: Many don't know about financial aid programs
What Would Real Reform Look Like?
Price transparency: Mandatory upfront pricing for all services
All-payer rate setting: Standard prices regardless of insurance
Surprise billing expansion: Cover all emergency and involuntary care
Credit reporting ban: Medical debt removed from credit reports permanently
Debt forgiveness programs: Government assistance for unaffordable medical debt
Healthcare access: Expanding coverage to reduce need for debt
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Resources
Federal Resources
- •CFPB Medical Debt: consumerfinance.gov/rules-policy/medical-debt
- •No Surprises Act Info: cms.gov/nosurprises
- •Healthcare.gov: insurance options
Credit Bureaus
- •Equifax: equifax.com/personal/credit-report-services
- •Experian: experian.com/disputes
- •TransUnion: transunion.com/credit-disputes
Consumer Help
- •Consumer Financial Protection Bureau: consumerfinance.gov/complaint
- •National Foundation for Credit Counseling: nfcc.org
- •Patient Advocate Foundation: patientadvocate.org
- •Dollar For: dollarfor.org (helps with hospital charity care)
Legal Aid
- •Legal Services Corporation: lsc.gov
- •National Association of Consumer Advocates: naca.net
- •Your state legal aid organization
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Conclusion: You Have More Power Than You Think
Medical debt feels overwhelming because the system is designed to confuse you. Bills arrive months after treatment, filled with codes and charges you don't understand. Insurance denies claims without explanation. Collectors call relentlessly.
But you have rights—and you have options.
Key takeaways:
- •Always request itemized bills and look for errors
- •The No Surprises Act still protects against balance billing for emergencies
- •Financial assistance is available at most nonprofit hospitals
- •Credit bureau voluntary protections remove debt under $500
- •State laws may provide additional protection
- •Dispute inaccurate debt on your credit reports
- •Know your rights against debt collectors
The medical debt crisis is a policy failure, not a personal failure. Getting sick or injured shouldn't destroy your financial future. While we fight for better laws, use the tools available to protect yourself.
Your health matters. Your financial security matters. Don't let medical debt go unchallenged.
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This guide provides general information about medical debt rights and does not constitute legal, financial, or medical advice. Laws vary by state and are subject to change. Consult appropriate professionals for specific situations.
Sources: CFPB, CMS, Patient Advocate Foundation
Last Updated: December 2025