CFPB Ruling on Medical Debt Reversed by the Court
If was near the end of the Biden Administration when a rule removing Medical Debt from credit reports was finalized and activated March 2025. The rule was finalized in January 2025 and weeks before the end of the Biden administration. It was banning the reporting of medical debt in credit reports. The CFPB agency reported an ~15 million Americans would benefit from the change. The implementation would remove ~$49 billion in medical debt from records. It was set to go into effect in March 2025.
All of this changed when Tr__ p took office. New CFPB leadership was appointed by President Trump to the CFPB. The agency reversed its position on the consumer protection rule. It also joined forces with the plaintiffs who filed the suit to block it.
Since May of 2025, Judge Sean Jordan from Texas’ Eastern District has twice ordered a stay delaying the rule’s start date to July 28. He was to make a ruling on whether or not to vacate it by mid-June. Well, it was delayed further until July 2025.The judge finally made his ruling.
Judge Sean Jordan of the US District Court of Texas’ Eastern District found the rule exceeded the bureau’s authority under the Fair Credit Reporting Act. The court was agreeing with the arguments of the two industry associations. Each of which filed a lawsuit against the rule that was later joined by the Trump administration.
The rule would prohibit lenders from using medical devices, such as wheelchairs or prosthetic limbs, as collateral for loans. It would bar them from repossessing the devices if patients were unable to repay the loans. However, lenders would have been able to continue to consider medical information in certain situations. This would include when a consumer requests a loan to pay health expenses. Asking for a temporary postponement of loan payments for medical reasons would also be a included. So, it was balanced in a sense.
Consumer Data Industry Association’s CEO Dan Smith; “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. This is the right outcome for protecting the integrity of the system.”
Efforts in 2022 by the reporting credit agencies Equifax, Experian and TransUnion announced they would remove nearly 70% of medical debt from consumer credit reports. Even so, penalizing unavoidable medical illness or disorders does seem to be a reach too far by commercial business.
Some additional reading:
“Judge nixes a Biden rule in order to keep medical debt on credit reports,” CNN Business
“CFPB’s medical debt rule could be thrown out under its new leadership,” NPR
If medical debt payment is enforceable, not sure why a credit report would not consider it. Credit reports aren’t kind of moral judgements, but supposed to be indicative of repayment risk factors. If you are expected to pay $20,000 medical debt, the auto finance company should know that. I suggest running the numbers both ways and letting potential creditors decide what it all means to them.
Eric:
That is why credit reports are not a source of regulation? Poor credit is a judgement for the future. If I can not work, I can not pay. And credit reports can be noted in a reference for a job.
Bill, I continue with Cloudflare problems on making replies, so I make new comments. But I do think the “both ways” option works. The lender thinking about supplying you fresh credit understands your current situation better and the prospective employer could say “medical debt is out of personal control, so the score without that is my reference”. But I thought credit scores were not to be used in employment decisions any more. Maybe it is state by state. Medical debt is really unfortunate and in many ways unfair, but if the law is that the particular debt is valid and you are expected to pay it, other creditors should know this as they consider lending. Removing medical debt from credit scoring entirely – if that was the idea – feels too much. Some folks will figure out that if the feel a little stress, well let those medical bills go unpaid. And soon after Ken’s Dialysis Plus is telling Donna that it’s cash in advance.
Eric:
Why do I feel you are coming around a bit. Thank you for the comment Eric. We use Cloudflare also. Our techie person is finally getting it under control. I spent the week battling hackers through him.
Makey sure you click on the right spots and check the box. Give it time to react to you. Don’t rush it.