• Fifteen states have laws prohibiting medical debt on credit reports.
• A new interpretive rule from the Consumer Financial Protection Bureau maintains that state law restrictions on the reporting of certain information, including medical debt, are preempted by the federal Fair Credit Reporting Act.
• Even with this new development, employers may want to exercise caution when considering whether to factor medical debt in making employment decisions.
• Applying background check policies uniformly can help to prevent discrimination claims.

Most businesses in the financial services industry are required by federal law to conduct credit checks before hiring an employee. Likewise, it’s common for insurance companies, law firms, real estate companies, law enforcement agencies, government contractors, and other employers to complete a credit check before hiring someone into certain sensitive positions. The purpose of these credit checks is two-fold: (1) to ensure that individuals in financially sensitive positions have good “financial hygiene” and (2) to mitigate legal risk and prevent embezzlement, theft, extortion, the sale of confidential and trade secret information, and other financial crimes.

In 2022, the three major credit bureaus in the United States voluntarily agreed to exclude medical debt from credit reports if the debt is less than $500, is less than one year delinquent, or is already paid.

If an employer obtains an applicant’s consent to run a credit check, it may see...

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