Key Points
- A Texas federal judge has blocked the CFPB's January 2025 rule that banned the inclusion of medical debt in credit reports.
- The ruling reverses protections for up to 15 million Americans and allows medical debt to impact credit scores once again.
- The CFPB, now led by Trump administration officials, joined industry plaintiffs to challenge the rule it had previously created.
A federal judge in Texas on Friday struck down a Consumer Financial Protection Bureau regulation that had banned medical debt from appearing on credit reports. The ruling, issued by U.S. District Judge Sean Jordan, rescinds one of the Biden administration's signature consumer protection rules (PDF File), just two months before it was set to take effect.
The CFPB rule, finalized in January 2025, would have eliminated $49 billion in medical debt from consumer credit reports. It was designed to protect patients from credit score damage caused by unexpected or inaccurate medical bills. About 15 million people stood to benefit, according to the CFPB's own analysis.
But under new leadership appointed by President Trump, the agency abandoned its defense of the rule. Instead, it joined with credit reporting industry trade groups to argue that the regulation exceeded its legal authority. Judge Jordan, a Trump appointee, agreed, finding that the Fair Credit Reporting Act did not permit the CFPB to take such action.
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What The CFPB Rule Did For Medical Debt
The regulation, issued in the final days of President Biden's term, aimed to remove medical bills from the credit reporting system entirely. It barred credit bureaus from including medical debts on reports shared with lenders and prevented lenders from factoring in such information when making decisions.
The CFPB's studies showed that medical bills often appeared on credit reports due to billing errors or disputes with insurers, not because of a borrower’s unwillingness to pay. In fact, the agency concluded that medical debt had little predictive value in assessing whether someone could repay a non-medical loan.
Medical billing is notoriously messy, with errors happening regularly. You can read my story of disputing medical bills on more than one occasion, along with a guide on how to handle it.
Supporters of the rule, including the American Medical Association and the American Cancer Society, argued it was a matter of fairness. Unexpected health problems, they said, should not stand in the way of securing a mortgage or auto loan.
Federal Judge Strikes Down Rule
The lawsuit that led to the rule's demise was filed by the Consumer Data Industry Association and the Cornerstone Credit Union League. It claimed the CFPB had overstepped its authority and argued that removing medical debt from credit history would undermine the accuracy and completeness of credit data.
With the administration changes from Biden to Trump, the CFPB reversed its position and sided with the plaintiffs. In court filings, it acknowledged that the rule should be vacated, citing limitations in the Fair Credit Reporting Act. Judge Jordan agreed with that reasoning.
What This Means For Americans With Medical Debt?
The ruling is expected to have a direct impact on millions of consumers. Medical debt will be reported and negatively impact credit scores. The only option is for individual consumers to review their credit report and scores and dispute inaccuracies.
While the federal rule has been overturned, some states have already passed laws that limit how medical debt can be reported or collected. California, Colorado, and New York, for example, restrict or prohibit the inclusion of medical debt on credit reports.
Other states have introduced consumer protections in areas such as wage garnishment and hospital billing practices. But without a federal standard, protections will remain uneven across the country.
What Happens Next?
With the CFPB rule now voided, medical debts can continue to appear on credit reports. Although the three major credit bureaus (Experian, TransUnion, and Equifax) have voluntarily made some changes, such as removing debts under $500 or less than a year old, unpaid bills can still have an effect.
Americans with low credit scores due to medical debt may now face higher interest rates or be denied loans entirely.
While the ruling could still be appealed, with the CFPB no longer supporting the regulation, legal options are limited. Consumer groups may continue to push for congressional action, though it remains unclear whether lawmakers will take up the issue.
In the meantime, millions of Americans remain caught between medical crises and financial uncertainty.
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Editor: Colin Graves
Robert Farrington is the founder of The College Investor and is widely recognized as one of the nation’s leading voices on student loan debt and saving for college. He holds an MBA from UC San Diego Rady School of Management and has spent over 15 years researching, writing, and advising on student loans, 529 plans, financial aid programs, and saving and investing for young professionals.
Robert has been featured in the The New York Times, The Wall Street Journal, The Washington Post, NBC News, and Forbes, where he has been a regular personal finance contributor for over a decade. His work combines both professional expertise and personal experience – he successfully navigated his own student loan repayment journey and has helped thousands of readers do the same.
He is committed to making the intersection of personal finance and education transparent and accessible. You can learn more about Robert on the About Page or on his personal site RobertFarrington.com.