A Biden-era Consumer Financial Protection Bureau ruling that would have removed medical debt from credit reports was struck down. Photo by Nick Youngson, Pix4free.

News Release

NEW YORK — A Consumer Financial Protection Bureau rule that would have removed medical debt from credit reports was struck down by a Texas federal judge.

Trump appointee U.S. District Court Judge Sean Jordan of Texas’s Eastern District ruled on Friday, July 18 that the rule exceeded CFPB jurisdiction. According to Jordan, the Fair Credit Reporting Act does not allow the CFPB to remove medical debt from credit reports.

The FCRA protects information collected by consumer reporting agencies.

The bureau said that by removing medical debt from consumer credit reports, the credit scores of millions of households were expected to increase by an average of 20 points. According to its research, CFPB found that unpaid medical claims are often used to reject mortgage applications, despite the presence of these claims being a poor predictor of an individual’s ability to repay loans.

Experian, Equifax and Transunion, the country’s three national credit reporting agencies, announced last year that they would stop tracking medical debt under $500 on their U.S. consumer credit reports. The CFPB rules would prohibit prohibit lenders from using the information on all unpaid medical expenses and prevent them from appearing on credit reports.

An estimated $49 million in medical debt would have been struck from credit reports for 15 million Americans, had the rule gone into effect. According to the CFPB, one in five Americans one or more medical debt collection accounts on their credit report, while more than half of all credit report collection items are for medical debt. The CFPB also found that the problem disproportionately affected people of color: 28% of black people and 22% of Latino people in the United States have health debts, while 17% of white people have health debts.

After the 2008 financial crisis, Congress founded the CFPB to monitor mortgage providers, credit card companies, debt collectors and other areas of the consumer finance business. Earlier this year, the Trump administration asked the agency to suspend almost all operations, effectively closing it.