Judge overturns Biden-era rule that curbed medical debt reporting after CFPB backs off
A federal judge granted the request of President Donald Trump’s administration to vacate a Biden-era rule that would remove some medical debt from consumer credit scores, after trade groups filed a lawsuit blocking the order.
The Prohibition on Creditors and Consumer Reporting Agencies Concerning Medical Information rule was finalized by the Consumer Financial Protection Bureau (CFPB) on Jan. 7, only to meet immediate pushback from the Cornerstone Credit Union League and the Consumer Data Industry Association.
The CFPB, now under the control of the Trump administration, has been largely gutted in the wake of cuts from Elon Musk's Department of Government Efficiency (DOGE). The agency declined to enforce the rule, joining debt industry lobbyists in asking that it be vacated.
U.S. District Judge Sean Jordan ultimately obliged, ruling that the regulation exceeded the CFPB’s legal authority under the law, as such restrictions are typically passed by Congress.
In pushing for the initial policy shift, the Biden administration argued that the prohibition would remove $49 billion in medical debts from credit reports, to the benefit of 15 million Americans. In terms of the specifics, the law banned firms from lowering credit scores as a result of medical debt, and limited when those unpaid bills could be reported at all.
Further, it contained privacy provisions that forbade the sharing of medical information, meaning no reporting was allowed to include sensitive health details, such as specifics on procedures and diagnoses. Creditors were also barred from considering the medical conditions of consumers when making financial decisions, such as how much to lend an individual.
The proposed legal basis for the CFPB to take this action under the direction of Biden is a 2003 law that requires credit agencies to accurately report the financial history, including debts, of all Americans. However, Jordan thought the prohibition rule was an overreach that did not align with the law, and argued that overturning it was "the appropriate remedy."
Trade group praises judge's ruling
Dan Smith, head of the Consumer Data Industry Association, was quick to praise the court’s decision, noting that creditors need to factor in medical debts in order to get a full picture of a person’s finances.
“America’s financial system is the best in the world because it is based on a full, fair and accurate credit reporting system. Information about unpaid medical debts is an important element in assessing a consumer’s ability to pay,” he said in a statement. “This is the right outcome for protecting the integrity of the system.”
“Our member companies remain committed to providing complete and accurate information to support lenders and help consumers access financial products,” Smith added.
The CFPB has not publicly commented on the ruling.
Chad is an award-winning writer and editor with over 15 years of experience working in media. He has a decade-long professional background in healthcare, working as a writer and in public relations.