Judge Blocks Biden Rule, Medical Debt Stays On Credit Reports/ Newslooks/ WASHINGTON/ J. Mansour/ Morning Edition/ A federal judge has struck down a Biden-era rule that aimed to remove $49 billion in medical debt from Americans’ credit reports. Industry groups and Republicans argued the rule exceeded the CFPB’s authority and threatened credit accuracy. The decision keeps medical debt as a key factor impacting credit scores and loan approvals.
Medical Debt Ruling Quick Looks
- Judge overturns CFPB rule removing medical debt from credit reports
- Biden-era rule aimed to erase $49 billion in medical bills
- About 15 million Americans would’ve benefited from rule
- Industry argued rule undermined credit reporting accuracy
- Lenders can still use medical debt in credit decisions
- Rule would have banned using medical devices as collateral
- Republicans claim rule threatened financial system stability
- Consumer advocates warn ruling harms credit fairness
Deep Look
Judge Overturns Biden-Era Rule Aimed at Removing Medical Debt From Credit Reports
NEW YORK (CNN) — Millions of Americans struggling with medical debt will continue to see those unpaid bills linger on their credit reports after a federal judge last week struck down a sweeping rule crafted during the Biden administration.
Judge Sean Jordan of the U.S. District Court for the Eastern District of Texas ruled that the Consumer Financial Protection Bureau (CFPB) overstepped its legal authority in issuing the regulation, siding with industry groups and Republican leaders who argued that removing medical debt from credit histories would harm the financial system and impede lenders’ ability to accurately assess credit risk.
The ruling marks a significant setback for consumer advocates who had hailed the CFPB’s plan as a long-overdue reform. The rule, finalized shortly before President Joe Biden left office in January, aimed to wipe an estimated $49 billion in medical bills off the credit reports of roughly 15 million people. It also sought to ban lenders from considering certain medical information in loan decisions—a move the CFPB argued would reduce discrimination and inaccuracies in the credit system.
“The court finds that every major substantive provision of the Medical Debt Rule exceeds the CFPB’s statutory authority,” wrote Jordan, who was appointed to the bench by former President Donald Trump. His decision effectively blocks the agency’s efforts to implement the changes.
What the Rule Would Have Changed
The CFPB’s regulation went far beyond simply removing debt figures from credit files. It would have:
- Deleted existing medical debt from credit reports, potentially boosting credit scores by an average of 20 points for affected consumers.
- Prevented lenders from using medical devices, such as wheelchairs or prosthetic limbs, as collateral for loans and prohibited repossessing such devices if borrowers defaulted.
- Limited the use of medical information in credit decisions, except in cases where consumers explicitly requested loans for medical expenses or needed payment deferrals due to health issues.
The CFPB projected the rule could have led to the approval of around 22,000 additional mortgages annually, improving access to homeownership for many consumers burdened by past medical bills.
Industry and Republican Pushback
However, the rule faced immediate resistance from industry groups and Republican lawmakers who argued it would undermine the integrity of credit reporting. In an August letter to then-CFPB Director Rohit Chopra, several House Republicans expressed “serious concerns” that the proposed rule would weaken the accuracy and completeness of credit reports, making it more difficult for lenders to manage risk.
Industry associations echoed those fears. The Consumer Data Industry Association, one of the plaintiffs in the lawsuit, applauded the judge’s ruling. “Lenders would potentially have had an inaccurate and incomplete picture when making lending decisions,” said Dan Smith, CEO of the association, in a statement.
“America’s financial system is the best in the world because it’s based on full, fair, and accurate credit reporting. Information about unpaid medical debts is an important element in assessing a consumer’s ability to pay.”
ACA International, which represents credit and collection professionals and was also part of the lawsuit, framed the judge’s decision as a win for the rule of law.
“The judge affirmed that the CFPB does not have the ability to write law—that is the job of Congress,” the organization said. The association warned the rule could have resulted in lenders tightening credit standards and health care providers demanding upfront payments from patients fearful of being unable to recoup costs.
A Deeper Divide Over Medical Debt
Consumer advocates see the judge’s ruling as a blow to struggling patients who often find themselves caught between insurers, hospitals, and billing errors. CFPB research indicates medical debt on credit reports is a poor predictor of whether a consumer will repay other loans and often stems from billing mistakes rather than financial irresponsibility.
“Medical debt should never ruin someone’s chance at buying a house or getting affordable credit,” said Emily Stewart, executive director of Community Catalyst, a consumer health advocacy group. “This decision keeps harmful, inaccurate information in our credit system and punishes people simply for getting sick.”
The CFPB argued in its rule that health care expenses are unlike other debts because they frequently arise unexpectedly, often result from emergency situations, and can involve complex disputes over insurance coverage and billing errors. According to the bureau, removing medical debt from credit reports would not significantly increase lenders’ risk while sparing millions of Americans from the financial fallout of illnesses and injuries.
Next Steps
It remains unclear whether the CFPB will appeal Judge Jordan’s ruling. For now, medical debts—even those already paid off—will continue to appear on consumers’ credit reports, potentially dragging down credit scores and affecting the ability to secure loans or favorable interest rates.
Meanwhile, political divisions over how to handle medical debt appear likely to persist. Republicans remain adamant that removing such information from credit reports would destabilize the lending system, while Democrats and consumer advocates argue that the current credit reporting framework unfairly penalizes Americans for health crises beyond their control.
As debates continue in Washington, millions of Americans will have to navigate the financial consequences of medical debt that remains etched into their credit histories.
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