Written by: Eric Bank
Edited by: Lillian Guevara-Castro
Reviewed by: Adam West
Key Takeaways
- The state of Washington will prohibit credit bureaus from reporting medical bills to their databases starting July 27, 2025.
- The new law echoes a CFPB initiative that was finalized but stalled before nationwide implementation.
- The credit reporting ban in Washington forces lenders and bureaus to adapt to new state regulations regarding medical debt reporting.
Washington state has become the latest advocate in the national debate regarding medical debt and credit scores. Senate Bill 5480, which was signed into law on April 22 by Gov. Bob Ferguson, requires credit bureaus to stop reporting medical debt starting July 27.
“No one should have to endure financial ruin to seek life-saving care, especially when so many people are struggling to afford the basics,” said Washington Senator Marcus Riccelli, from Spokane, who sponsored the bill.
It seems the credit reporting agencies will need to modify their practices to follow state laws, which raises questions about the effect the new law will have on the industry in general.
The new legislation draws national attention because it influences how credit reporting bureaus will report medical debt all over the nation. The data appears on credit reports that lenders, landlords, and employers use to make decisions.
The practice of listing medical expenses on credit reports faces opposition because these bills emerge unexpectedly without any connection to financial mismanagement.
Backstory: A Nationwide Initiative That Fell Through
Washington state implemented measures that mirrored a federal program which currently faces stagnation under the current administration.
The Consumer Financial Protection Bureau issued its final rule in January to delete $49 billion worth of medical expenses from 15 million American credit reports beginning in 2025. The federal regulation would have barred credit bureaus from reporting medical debt, but it’s future is very much in limbo.
The major credit bureaus voluntarily excluded medical bill payments and debts below $500 from consumer credit histories in 2023. The new law requires them to exclude all medical debt owed by Washington state residents.
The credit bureaus Equifax, Experian, and TransUnion conducted voluntary updates during 2023 to exclude medical bill payments, together with debts below $500, from consumer credit histories. The medical collections issue continued to pose problems to consumers because advocates felt that the steps taken were insufficient.
The federal government has halted its progress in this area, so some states will handle this matter independently. The new legislation strengthens the debate regarding the future direction of consumer protection policy.
Implementation Challenges for Credit Bureaus
The credit bureaus will experience technical issues due to the recent passage of SB 5480.
The bureaus must develop new systems that detect medical debt owed by Washington state residents without affecting their other regional compliance requirements. The patchwork system may force credit bureaus to make extensive changes to their medical entry management processes.
Regulatory difficulties created by the new law may force credit bureaus to expand the exclusion of medical debt to other states, or completely revamp their record-keeping systems.
The removal of medical bills from credit reports provides consumers with two major benefits: it enhances their credit scores, and it allows them to secure credit and find employment and housing opportunities.
Of course, the removal of medical bills will not eliminate the obligation to pay these debts. Collection agencies are still free to try to get paid. And the interest will still accrue.
Could This Spark a Wave?
Washington joins Colorado, New York, California, Connecticut, and Illinois in passing laws that prohibit or restrict the reporting of medical debt to credit bureaus.
Look for more blue states to jump on this bandwagon. Eventually, the credit bureaus will find a way to adapt to a crazy quilt of laws across the country. The new law in Washington state accelerates the process.
