Trump-Appointed Judge Overturns Regulation to Eliminate Medical Debt from Credit Reports

Yet another Biden-era reform intended to make life easier for some Americans has been quashed. Late last week, a Trump-appointed federal judge struck down a rule issued by the Consumer Financial Protection Bureau that would have removed all medical debt from being included in people’s credit reports.

Judge Sean Jordan of the U.S. District Court of Texas’ Eastern District issued the decision Friday, declaring that the CFPB’s rule surpassed the limits of its authority. The agency previously stated its rule would have significantly improved the credit scores of millions of Americans. It’s the latest setback for the CFPB, which the Trump administration has effectively destroyed.

In March 2022, the CFPB published a report highlighting the burden of medical debt. It found that Americans owed at least $88 billion of medical debt in 2021, which represented 58% of all third-party debt collection tradelines. Debt collectors also often hounded people who had already paid off their medical bills, it found. The report concluded that medical debt was a poor indicator of people’s credit trustworthiness, especially given that it’s usually incurred through emergency and unexpected health problems. The CFPB’s pressure soon led the three major credit reporting agencies to announce that they would remove many forms of medical debt from their calculation of credit reports.

The CFPB pushed further, however, finalizing a rule in early January barring all medical debt from influencing people’s credit scores. It estimated that the rule would remove roughly $49 billion in medical bills from the credit reports of 15 million Americans, raising their scores by an average of 20 points.

But it didn’t take long for the credit and collections industries to strike back with lawsuits. In February, Judge Jordan issued a 90-day stay that suspended the rule from being implemented in March as scheduled. The agency justified its rule as an extension of the power given to it through the Fair Credit Reporting Act—an argument that Judge Jordan ultimately declined to endorse in his ruling.

While some states have taken action on their own to reduce the accumulation of medical debt and its effects on people’s credit, the reversal of the CFPB’s rule will undoubtedly harm the financial health of many Americans, consumer protection advocates have said.

“This ruling is a disappointing setback—but it will not stop the growing movement to protect people from the financial harm of medical debt,” Colin Reusch, policy director at Community Catalyst, a nonprofit focused on health care equality, told NPR Tuesday.

Though the federal government could theoretically appeal the court ruling, that seems unlikely, given the current state of the CFPB. The agency is one of many that President Donald Trump has systematically dismantled since taking office. The administration ordered the CFPB to cease nearly all operations in early February and is even trying to rescind settlements against companies already obtained by the agency.