Federal Judge Kills CFPB Rule that Banned Medical Debt in Credit Reports
Last updated August 8, 2025
The consumer-friendly Medical Debt Rule, enacted by the Consumer Financial Protection Bureau (CFPB) at the end of the Biden administration, has been thrown out by a judge in Texas.
The rule would have removed an estimated $49 billion in medical debt from the credit reports of roughly 15 million Americans and prohibited lenders from considering medical information when making future lending decisions.
The credit reporting industry filed a lawsuit to kill the rule, arguing it could give lenders an “inaccurate and incomplete picture” when making lending decisions and result in reduced access to credit.
In mid-July, U.S. District Court judge Sean Jordan ruled that the CFPB did not have the legal authority to issue the Medical Debt Rule and vacated it. Jordan, a Trump administration appointee, found that “every major substantive provision of the Medical Debt Rule” exceeded the CFPB’s authority.
Fifteen states—California, Colorado, Connecticut, Delaware, Illinois, Maine, Maryland, Minnesota, New Jersey, New York, Oregon, Rhode Island, Vermont, Virginia, and Washington—have their own laws that ban or restrict the reporting of medical debt to credit bureaus. Judge Jordan stated that those laws also would be voided by his ruling. But Chi Chi Wu, an attorney at the National Consumer Law Center, noted in a blog post that the court’s ruling “has no legal effect” for those 15 states because the final judgment did not contain an order or injunction with respect to state laws, “nor could the court have made such a ruling in these circumstances, where the issue was not before it.” The status of these state laws Wu noted, would need to be contested in a court with jurisdiction, presumably in a court located within each relevant state.
Consumer advocates are disappointed in the court ruling.
“The rule would have provided immediate relief to people unfairly harmed simply because they got sick,” said Mike Litt at U.S. PIRG. “We have known for years that medical debt doesn’t accurately predict a person’s desire and willingness to pay off loans. Without this rule, millions of Americans who owe tens of billions of dollars in medical debt will continue to be penalized for life events they can’t control, such as getting sick or injured.”
The Consumer Data Industry Association (CDIA), a trade group representing consumer-reporting agencies, applauded the court’s decision.
“America’s financial system is the best in the world because it is based on a full, fair, and accurate credit reporting system,” said Dan Smith, CDIA’s president and CEO. “Information about unpaid medical debts is an important element in assessing a consumer’s ability to pay. This is the right outcome for protecting the integrity of the system.”
In an unusual move, the Trump administration joined the credit reporting industry in asking the court to throw out the Medical Debt Rule.
A group of 30 Democratic Party and independent senators wants to know why. They believe the rule would have helped consumers without reducing the accuracy of credit scores. They sent a letter to the CFPB’s acting director, Russell Vought, requesting information about his agency’s decision to encourage the court to kill a rule it created, including any communications with debt collection agencies, CNN reported.
What the Rule Would Have Done
The Medical Debt Rule was designed to reduce the financial fallout from unpaid medical debt, a growing problem in the U.S. In announcing the proposed rule, the CFPB said it would help increase credit scores and loan approvals, stop credit reporting companies from sharing medical debts with lenders, and prohibit lenders from making lending decisions based on medical information.
A CFPB analysis found that medical debt penalizes potential borrowers by making underwriting decisions less accurate, leading to thousands of denied applications for mortgages that consumers would repay. The rule, the agency said, would result in an additional 22,000 mortgages being approved each year and boost the credit scores of Americans with medical debt by 20 points, on average.
The Medical Debt Rule also prohibited lenders from using medical devices, such as wheelchairs or prosthetic limbs, as collateral for loans or repossessing them if people could not repay the loan.
In 2023, the three largest U.S. credit bureaus—Equifax, Experian, and TransUnion—announced they would voluntarily change how they treated medical debt by not reporting debts of less than $500 and extending the grace period for reporting unpaid medical debt of more than $500 from six months to one year. Equifax, Experian, and TransUnion also said they will no longer report medical debt after it’s repaid, so it cannot drag down credit scores. Prior to 2023, medical debt stayed in credit files for up to seven years.
So far, the three major credit bureaus have said they will continue to voluntarily limit how they treat medical debts. But Equifax, Experian, and TransUnion are not the only companies supplying info to lending institutions or to businesses that calculate scores affecting consumers’ creditworthiness, insurance rates, and more.
A Serious and Growing Problem
Medical debt is different from credit card debt. It’s not like going on an expensive shopping spree. No one plans to have emergency surgery or expensive chemotherapy. Even for those with insurance, medical bills can be financially devastating.
About 100 million Americans—including 41 percent of adults—are struggling to deal with medical debt, according to a 2022 investigation by NPR and Kaiser Family Foundation (KFF). A quarter of adults with healthcare debt owe more than $5,000, the survey found. And about one in five, regardless of the amount of debt, said they didn’t expect to ever pay it off.
Medical debt can be more serious for older adults, who may be dealing with various health issues. A CFPB analysis in 2023 found that for those 65 and older who have medical debt, the average balance was about $13,800.
Adding to the problem, medical billing mistakes are common and can result in negative information being reported to the credit bureaus. About one in five people said they’d recently received a medical bill they disagreed with or couldn’t afford, according to a survey published in JAMA Health Forum last year.
When the Medical Debt Rule was announced in June 2024, Rohit Chopra, CFPB Director at the time, said: “The CFPB is seeking to end the senseless practice of weaponizing the credit reporting system to coerce patients into paying medical bills that they do not owe. Medical bills on credit reports too often are inaccurate and have little to no predictive value when it comes to repaying other loans.”
What Can You Do?
If you have medical debt in your credit files, find a way to deal with it.
"If you believe there’s a billing error, get an itemized bill from your provider and challenge the charges,” said Bruce McClary, a senior vice president at the National Foundation for Credit Counseling (NFCC). “That could be a good first step before negotiating a settlement or working out a hardship payment plan with the hospital.”
If the charges are accurate and you can’t afford to pay, ask the provider or hospital about financial assistance programs; most hospital have them, and even those earning six figures can sometimes qualify. Also ask if there’s an interest-free repayment program available.
If you can’t get some or all the debt forgiven, consider negotiating a settlement with the debt collector.
Your best resource may be a nonprofit credit counselor. They can help you review your finances, negotiate with creditors, and create a plan to resolve your medical debt. Contact the National Foundation for Credit Counseling to get started.
More from Checkbook:
- Dealing with Unexpected Medical Bills
- How to Find the Best Doctors
- Consumerpedia, episode #9: To Your Credit: Understanding How Credit Scores Work
- Consumerpedia, episode #25: Dealing with Debt
Contributing editor Herb Weisbaum (“The ConsumerMan”) is an Emmy award-winning broadcaster and one of America's top consumer experts. He has been protecting consumers for more than 40 years, having covered the consumer beat for CBS News, The Today Show, and NBCNews.com. You can also find him on Facebook, Blue Sky, X, Instagram, and at ConsumerMan.com.