CFPB Ban on Medical Debt Reporting Vacated by Texas Judge (1)

A federal judge in Texas eliminated a Biden-era Consumer Financial Protection Bureau rule barring medical debt from credit reports and lending decisions, handing a win to credit reporting companies and the Trump administration.

“The Medical Debt Rule exceeds the Bureau’s statutory authority,” Judge Sean D. Jordan of the US District Court for the Eastern District of Texas said in a Friday ruling.

The CFPB under the leadership of acting Director Russell Vought moved to vacate the rule alongside industry plaintiffs the Consumer Data Industry Association and the Cornerstone Credit Union League, a Texas credit union trade group.

Jordan had subsequently allowed the New Mexico Center on Law and Poverty, Tzedek DC, and other consumer groups to step in and defend it.

The CDIA, which represents major consumer credit reporting companies, and the CFPB argued that the agency under former Director Rohit Chopra exceeded its authority in banning the reporting of medical debt on credit reports.

“America’s financial system is the best in the world because it is based on a full, fair and accurate credit reporting system,” Dan Smith, the CDIA’s president and CEO, said in a statement. “Information about unpaid medical debts is an important element in assessing a consumer’s ability to pay.”

The consumer advocate intervenors said they are evaluating their next steps.

“We are disappointed in the ruling,” Chi Chi Wu, a National Consumer Law Center attorney representing the intervenors, said.

The CDIA, the CFPB, and counsel for the consumer groups didn’t immediately respond to requests for comment.

Medical Debt Ban

The Biden-era CFPB said at the time that its rule, finalized in January, closes a loophole in the 1970 Fair Credit Reporting Act that allowed third-party debt collectors to report medical debt to credit reporting companies.

Around 15 million Americans have outstanding medical debt on their credit reports, with over $49 billion in unpaid debt subject to collection, the CFPB has reported. Removing the debt could lift credit scores by an average of 20 points, according to the agency.

Culling medical debt from credit reports was a high priority for the Biden administration, and the CFPB’s regulation was the last one finalized under Chopra.

The credit reporting industry sued to block the regulation on Jan. 7, the same day it was released. Debt collectors filed a separate lawsuit the following day.

Industry groups said only Congress can determine what information is included in consumer credit reports. Removing medical debt from credit reports would make it harder for banks, mortgage companies, and other lenders to determine the creditworthiness of loan applicants, the plaintiffs argued.

Williams & Connolly LLP; Carrington, Coleman, Sloman & Blumenthal LLP; and the Law Offices of Eric Blankenstein PLLC represent the credit-reporting plaintiffs.

The case is Cornerstone Credit Union League v. CFPB, E.D. Tex., No. 4:25-cv-00016, 7/11/25.