- A federal judged has ruled medical debt can be included on people’s credit reports. That overrules a Consumer Finance Protection Bureau edict made in January. Had medical debt been left off of credit reports, it was expected to result in the approval of roughly 22,000 additional mortgages each year.
Right before President Joe Biden left office in January, the Consumer Finance Protection Bureau (CFPB) announced a new rule that would remove unpaid medical bills from the credit reports of Americans. Now, a federal judge has vacated that rule.
Judge Sean Jordan of the US District Court of Texas’ Eastern District found the CFPB exceeded its authority with the rule, citing the Fair Credit Reporting Act. Only Congress, he says, has the ability to write law.
Two industry associations had filed suit against the rule. The Trump administration joined those suits after his second term began. Jordan was a Trump-appointed judge.
The ruling is likely going to make it harder for many people to get a mortgage or other loan.
The rule was expected to result in the approval of roughly 22,000 additional mortgages each year and would have raised the credit scores of people who are carrying medical debt by an average of 20 points. It would have removed $49 billion in medical bills from credit reports and prohibited lenders from factoring that type of debt in when making most loan decisions.
“People who get sick shouldn’t have their financial future upended,” CFPB Director Rohit Chopra said when announcing the new rules. “The CFPB’s final rule will close a special carveout that has allowed debt collectors to abuse the credit reporting system to coerce people into paying medical bills they may not even owe.”
Medical debt often includes mistakes, which can artificially impact credit scores. The CFPB also says medial debt is not a good indicator of whether a person is able to pay other loans. Opponents said the practice would undermine the credit score process.
