CFPB and Industry Organizations request a Federal Judge to eliminate the bureau's medical debt regulation.

Valiant Credit Services
Jul 8
3 min read

The CFPB has announced its intention to eliminate a rule from the Biden Administration that prevents credit reporting agencies from including medical debts in credit reports, which is one of several regulations from the Biden era that the Trump Administration aims to overturn.

Originally, this rule was set to be implemented in March; however, U.S. District Judge Sean Jordan from the Eastern District of Texas issued a 90-day stay, postponing the rule's effective date to June 15.

Currently, both the bureau and the industry groups that challenged the rule assert that it goes beyond the bureau's authority.

Both parties now concur that creditors are allowed to report medical debt information to consumer reporting agencies; these agencies can include such information in credit reports, provided it is accurately coded; and they may supply credit reports containing this properly coded information to creditors for purposes allowed under the Fair Credit Reporting Act (FCRA).

They agreed in a Joint Motion for Entry of a Consent Judgment that "Creditors may take into account medical information that is ‘reported using codes that do not identify, or provide information sufficient to infer, the specific provider or the nature of such services, products, or devices to a person other than the consumer.'"

The medical debt rule forbids credit reporting agencies from reporting debts, even if they utilize codes or information to obscure the nature of the medical treatment.

In the lawsuit, the Consumer Data Industry Association (CDIA) and the Cornerstone Credit Union League contended that the CFPB overstepped its authority in implementing the rule. The CDIA, based in Washington, D.C., represents both national and regional credit bureaus, while the Cornerstone Credit Union League, located in Plano, Texas, advocates for nearly 600 credit unions, including those in Texas.

Currently, there are pending motions to intervene in the case submitted by two organizations that claim to assist individuals with medical debt, namely the New Mexico Center on Law and Poverty and Tzedek DC, along with two individuals, Harvey Coleman and David Deeds, who assert they have medical debt.

In response to these motions, as well as the joint motion submitted by the parties, Judge Jordan has issued an order to cancel the previously scheduled preliminary injunction hearing, allowing the parties and proposed intervenors more time to enhance their briefs regarding intervention.

On Capitol Hill, Republican lawmakers have put forth Congressional Review Act resolutions aimed at nullifying the medical debt rule. These resolutions are still pending further action from Congress.

Sen. Mike Rounds, R-S.D., has introduced S. J. Res 36, which is also co-sponsored by Senate Banking Committee Chairman Sen. Tim Scott, R-S.C. This resolution, filed under the CRA, could be approved by a simple majority in both the House and Senate, and it would not face a filibuster in the Senate. Additionally, Rep. Ralph Norman, R-S.C., has introduced H.J. Res 74, a companion resolution in the House.

Several states, including California, Colorado, Connecticut, Illinois, Minnesota, New Jersey, New York, Rhode Island, and Virginia, have passed laws to exclude medical debts from credit reports.

Nevertheless, many of these states may have partially relied on an interpretive rule issued by the CFPB, which takes a narrow perspective on the extent of preemption under the FCRA. If the bureau were to withdraw that interpretive rule, those state laws could face challenges based on federal preemption.

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