The Trump administration is taking aim at a new Maryland law designed to keep medical debt from wrecking consumers’ creditworthiness, and in turn, their ability to buy a car, rent a home or even get a job.

Under President Joe Biden, guidance from the federal government prompted 15 states, including Maryland, to pass the laws to stop credit reporting agencies from factoring delinquent hospital and doctor bills into people’s credit scores.

Now, the Trump administration has pulled back that guidance in favor of a single national standard.

For now, the state laws are in effect. But some lawmakers and advocates in Maryland are concerned that the reversal on the federal level could now open up their laws to legal challenges. If the state law is struck down, they say, consumers’ credit scores could again be hurt by unanticipated medical debt that can become overwhelming.

Some 12% of Maryland households have medical bills they can’t pay, according to the consumer rights advocacy group Economic Action Maryland.

“Medical debt is oftentimes the result of something people have no control over, like an accident where they end up in the hospital with a massive bill for an ICU stay,” said state Sen. Clarence Lam, a Baltimore area Democrat and a sponsor of Maryland’s law.

“It’s not a good reflection of someone’s creditworthiness,” he said. “It shouldn’t determine if they get credit or the rate they pay.”

The Maryland law went into effect Oct. 1, but 27 days later, the federal Consumer Financial Protection Bureau took the position there can be only one national standard for credit reports.

The administration’s new rule is a reinterpretation of the Fair Credit Reporting Act. And this month, a debt collectors group seized upon the shift and sued in Colorado over a 2023 law similar to Maryland’s, which banned medical debt from credit reports.

As the matter plays out in federal courts, Maryland advocates and lawmakers are cautiously optimistic the state law will hold up, even if the Colorado law doesn’t.

Marceline White, executive director of Economic Action Maryland, said the Maryland law took a “belt-and-suspenders approach” that both bans medical providers from reporting the debt and prevents agencies from considering debt in people’s scores.

That could mean that if one approach is struck down, the other could stand, she said.

White said maintaining the law is crucial for those who now have debt, as well as those who may soon have debt as experts believe more people could become uninsured or underinsured thanks to rising health care premiums and cuts to federal health insurance programs.

She cited, in part, the impact of expiring federal subsidies to buy private insurance on the state health exchange — the central, yet unresolved issue of the recently concluded federal shutdown.

Without those subsidies, the state estimates tens of thousands in Maryland will forgo insurance altogether, while others are likely to downgrade to plans with lower premiums. But those cheaper plans also have far higher out-of-pocket costs, leading some to worry it could increase the likelihood of unsustainable medical debt.

Further, cuts to the Medicaid health program for poor residents are slated for next year, meaning more people could lose coverage.

“We’re going to see a lot of people lose their insurance, delay care and end up in the ER,” White said.

The credit reporting law doesn’t absolve people of the need to pay their bills. Instead, it removes some extra barriers to getting out from under the debt by helping to protect their credit rating, said Del. Lorig Charkoudian, a Montgomery County Democrat who worked on a set of consumer protections from medical debt this year.

The new law means that even with unpaid medical debt, consumers can still purchase a vehicle to get to a new job or rent a cheaper home — all potential ways of boosting their chances of paying their medical bills in full. It also means they won’t face financial fallout from erroneous charges, she said.

Before Maryland passed its law, opposition came from some of those who work to collect on debts. In testimony before the legislature in February, debt collectors said they were concerned that the law would be overly broad, cordoning off too wide a swath of health care-related debt.

Otherwise, the Maryland/DC Creditors Bar Association said that “items charged to a credit card for ‘medical debt’ such as elective procedures (i.e. cosmetic procedures) or the purchase of exercise equipment would be included in the definition.”