NEWS: A federal court in Texas has voided a CFPB rule that would have prohibited medical debts from appearing in credit reports.
“The [CFPB] has no such power to define what in a consumer report is ‘permissible,’” the judge wrote. “Congress has defined the permissible purposes of a consumer report, and a creditor has a permissible purpose if it intends to use the report for a credit transaction.”
The CFPB’s medical debt rule was finalized in January 2025. It amended Reg. V, the Fair Credit Reporting Act regulation. We summarized the rule in this Compliance Courier, explaining that it did two key things:
- It prohibited creditors (including credit unions) from using medical debt information to determine credit eligibility, with a few limited exceptions.
- It barred credit bureaus from including medical debt information on consumer reports and credit scores they send to lenders.
The Biden administration estimated that the rule would have removed almost $50 billion from the credit reports of almost 15 million people.
The Cornerstone Credit Union League and other groups filed lawsuits to stop the rule, contending that it exceeded the CFPB’s authority in violation of the Fair Credit Reporting Act and the Administrative Procedure Act. When the Trump Administration took office, the CFPB essentially switched sides, joining the industry groups in seeking to vacate the rule. The judge sided with the Cornerstone League and other plaintiffs.
“In sum, [the] FCRA expressly allows creditors to obtain and use properly coded medical-debt information in credit decisions, but the Medical Debt Rule would prohibit them from doing so,” the judge wrote. “As it now recognizes, the Bureau was powerless to promulgate such a rule that flouts a federal statute by functionally rewriting it.”
The League commented on this rule when it was proposed. We told the CFPB that the rule would artificially mask consumer’s debt levels and undermine the accuracy and reliability of credit reports.