Credit groups sue Biden administration over banning medical debt from credit scores – Washington Examiner

Annabella RosciglioneJanuary 8, 2025

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Two credit industry groups ⁣have initiated a lawsuit against the Biden administration ⁤in response to a new federal rule that prohibits including medical debt in credit⁣ scores. This lawsuit represents the interests of credit reporting agencies and credit unions, challenging the implications of the rule and its potential impact‍ on the ⁣credit landscape. The case raises significant questions about the ‌balance between consumer⁣ protection and the operational concerns of ⁤credit‌ institutions.

Credit groups sue Biden administration over banning medical debt from credit scores

Two groups, on behalf of credit reporting and credit union industries, have filed a lawsuit against a new federal rule barring medical debt from appearing on consumer credit reports.

The Consumer Financial Protection Bureau finalized a new federal rule Tuesday that would eliminate medical debt from consumer credit reports. Later that day, the Consumer Data Industry Association and Cornerstone Credit Union League filed a lawsuit in federal court in Texas against the regulation.

In the lawsuit, the trade groups say the new rule violates the Fair Credit Reporting Act, a law that outwardly permits consumer reporting agencies to report information about medical debt and authorizes creditors to consider that information.

“It is black letter law that an agency cannot prohibit through regulations what Congress has expressly permitted by statute. Because the final rule contravenes the statute, it should be vacated,” says the lawsuit.

According to the CFPB, there is an estimated $49 billion in unpaid medical bills from the credit reports of roughly 15 million Americans. The bureau estimated that eliminating medical debt on credit scores could help boost borrowers’ scores by an average of 20 points.

President Joe Biden’s administration announced the proposal in June 2024. Consumer Financial Protection Bureau Director Rohit Chopra said at the time of the announcement the rule would be an “enormous relief” for people with medical bills.

“No one should be denied economic opportunity because they got sick or experienced a medical emergency,” Vice President Kamala Harris said in a statement touting the new rule. “This will be life-changing for millions of families, making it easier for them to be approved for a car loan, a home loan or a small-business loan.”

Medical debt totals nearly $50 billion nationwide. If the rule stands, the White House said there will be “zero Americans with medical debt listed on their credit reports,” which is down from 46 million in 2020.

The case was assigned to U.S. District Judge Sean Jordan, who was appointed by President-elect Donald Trump during his first term. Trump and his GOP allies have been critical of the CFPB, with co-leader of the unofficial Department of Government Efficiency Elon Musk calling for the agency to be “deleted.”