Federal

Federal Judge Strikes Down Biden-Era Rule to Remove Medical Debt from Credit Reports

On July 11, Trump-appointed U.S. District Judge Sean Jordan of the Eastern District of Texas vacated the Consumer Financial Protection Bureau’s (CFPB) rule titled “Prohibition on Creditors and Consumer Reporting Agencies Concerning Medical Information (Regulation V).” This rule, adopted in January 2025, would have prohibited consumer reporting agencies from including medical debt information, when properly coded, on consumer credit reports, and would have barred creditors from considering such information.

Judge Jordan agreed with the CFPB’s current leadership and financial industry trade groups that the rule exceeded the agency’s statutory authority. The Fair Credit Reporting Act (FCRA) explicitly allows credit reporting agencies to include, and creditors to use, coded medical debt information. The court found that the CFPB’s rule contradicted this statutory permission.

The court’s order vacated the entire rule, effectively blocking its implementation nationwide.

President Biden’s administration created the rule to remove medical debt from consumer credit reports in order to reduce the financial burden on millions of Americans and ensure that people are not denied access to credit, such as mortgages, car loans, or small business loans, because of unpaid medical bills. The rule was expected to wipe $49 billion in medical debt from the credit reports of about 15 million people.

Medical bills can result from emergencies or necessary treatments, not from irresponsible borrowing. Many consumers report errors, such as inflated charges or bills for services never received, making medical debt a poor indicator of creditworthiness.

The lawsuit against the Biden administration’s rule was brought by the Consumer Data Industry Association and the Cornerstone Credit Union League, which argued that the CFPB’s rule unlawfully restricted the use of medical debt information in credit reporting and lending decisions. The CFPB, under Trump’s leadership, chose not to defend the rule in court and instead joined the trade groups in seeking to vacate it.

The ruling ensures that properly coded medical debt information can continue to be included in consumer credit reports, maintaining lenders’ ability to assess creditworthiness accurately.

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