Federal Judge Reverses Biden-Era Rule That Barred Medical Debt From Credit Reports

(The Epoch Times)—A federal judge in Texas has struck down a Biden-era rule that would have barred medical debt from appearing on credit reports.

In a July 11 order, U.S. District Judge Sean Jordan found that the Consumer Financial Protection Bureau (CFPB) overstepped its authority when in finalized the rule in January, two weeks before President Donald Trump was sworn in for a second term.

Under the Fair Credit Reporting Act, credit reporting agencies are allowed to include medical debt information in credit reports, provided the data is coded to conceal details such as the medical provider’s identity or the nature of the treatment. Creditors are permitted to consider this coded medical debt information when making lending decisions.

However, during the Biden administration, the CFPB issued a rule banning credit reporting agencies from reporting any medical debt information to creditors for credit determinations. The agency argued that medical debt is a poor indicator of a borrower’s creditworthiness and should not influence lending decisions.

Two trade associations—the Cornerstone Credit Union League and the Consumer Data Industry Association—sued the CFPB, contending that the medical debt rule exceeded the agency’s statutory authority and conflicted with the Fair Credit Reporting Act’s explicit allowance for the use of coded medical debt data.

After Trump took office, the CFPB under new leadership agreed with the plaintiffs that the medical debt rule was unlawful. Both sides proposed a consent judgment to vacate the rule entirely and send the matter back to the CFPB for further review.

Yet the proposed agreement faced opposition from several intervenors, including two individuals carrying medical debt and two advocacy groups. The individuals—a Texas truck driver with medical debt stemming from cancer treatment and a Washington, D.C., resident with debt incurred from his child’s medical care—argued that eliminating the rule would strip them of important protections. The advocacy organizations—the New Mexico Center on Law and Poverty and Tzedek DC—said repealing the rule would force them to divert scarce resources toward assisting clients with medical debt issues instead of other legal matters.

The judge, however, concluded that the proposed consent decree imposed no legal obligations on the intervenors and that they held no enforceable legal right to the rule itself. He ruled that the Fair Credit Reporting Act expressly allows credit reporting agencies to report coded medical debt information and that the CFBP’s rule had effectively rewritten federal law, exceeding the agency’s statutory authority.

“After full consideration of the parties’ arguments, Defendant-Intervenors’ objections, and the relevant law, the Court finds that the proposed consent judgment is fair, adequate, and reasonable,” the judge wrote in his opinion.

The Epoch Times has reached out to counsel for the intervenors for comment.

Under the Biden administration, the CFBP maintained that medical debt carries little predictive value regarding a borrower’s ability to repay other debts. The agency also cited concerns that medical debt listed on credit reports contributed to thousands of denied mortgage applications, even for borrowers otherwise capable of repayment.

“People who get sick shouldn’t have their financial future upended,” then-CFPB director Rohit Chopra said in a Jan. 7 statement. “The CFPB’s final rule will close a special carveout that has allowed debt collectors to abuse the credit reporting system to coerce people into paying medical bills they may not even owe.”

In a 2022 report, the CFPB highlighted what it described as the “complicated and burdensome nature” of the U.S. medical billing system. The agency found that medical bills frequently stem from emergencies or unexpected events, are subject to opaque pricing, and involve complex insurance rules. Patients often do not learn the full costs until after receiving treatment and, particularly those with chronic illnesses or urgent health issues, may feel compelled to accept any charges to secure necessary care.