A federal judge in Texas struck down a rule established by the Consumer Financial Protection Bureau (CFPB) under former President Joe Biden’s administration, which would have removed medical debt from credit reports.
Sean Jordan, a federal district court judge in the Eastern District of Texas—appointed by President Donald Trump—recently ruled that the rule exceeded the CFPB’s authority. Jordan stated that the CFPB is not authorized to remove medical debt from credit reports under the Fair Credit Reporting Act, which protects the information collected by agencies about consumer reports.
The bureau had projected that removing medical debt from consumer credit reports would raise credit scores for millions of families by an average of 20 points.
The CFPB argues that its research shows unpaid medical billing claims are a poor indicator of a person’s ability to repay a loan, yet they are often used to deny mortgage applications.
The three national credit reporting agencies—Experian, Equifax, and TransUnion—announced last year that they would remove medical collections under $500 from consumer credit reports in the U.S. The CFPB’s rule was expected to ban all unpaid medical bills from appearing on credit reports and prohibit lenders from using that information.
The CFPB estimated that the rule would have eliminated $49 billion in medical debt from the credit reports of 15 million Americans.
According to the agency, one in five Americans has at least one medical debt collection account on their credit report, and more than half of all collection records on such reports are medical debts. The issue disproportionately affects people of color, the CFPB found: 28% of Black Americans and 22% of Hispanic Americans have medical debt, compared to 17% of white Americans.
Congress created the CFPB after the 2008 financial crisis to oversee credit card companies, mortgage providers, debt collectors, and other consumer-focused segments of the financial sector. This year, the Trump administration requested that the agency suspend nearly all its operations, effectively leaving it inoperative.
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