The Trump administration joined with trade groups to ask a court to overturn a Biden-era rule that aimed to limit the impact of unpaid medical bills on consumers’ credit history.
In another blow to Biden-era financial regulations, a federal judge has blocked a rule that would have removed medical debts from millions of Americans’ credit reports.
The Consumer Financial Protection Bureau finalized the rule in early January, shortly before President Trump took office. The bureau estimated that the rule, which prohibited credit bureaus from including medical debt in the reports and scores sent to lenders, would have removed $49 billion in medical bills from the credit reports of 15 million Americans. Lenders use credit reports to make decisions about whether to approve loans for homes, cars and small businesses.
Before the rule took effect, two trade groups representing credit bureaus and credit reporting agencies sued to block it, arguing that the bureau had exceeded its authority. They filed the lawsuit in the U.S. District Court for the Eastern District of Texas, a popular venue for litigation challenging the federal government’s reach.
Under the Biden administration, the agency fought the lawsuit, but once Mr. Trump returned to the White House, the new leaders he installed to oversee the consumer bureau reversed course. In April, the bureau joined the trade groups in asking the federal court to strike down the agency’s regulation.
Last Friday, the court granted their request. Judge Sean D. Jordan wrote that he agreed with the trade groups’ argument that the consumer bureau’s rule conflicted with the Fair Credit Reporting Act, which governs consumer credit reports. That federal law allows lenders and credit reporting agencies to use financial information related to medical debts, and the bureau exceeded its authority by “fashioning a new regulatory scheme that conflicts with the plain text” of the existing law, the judge wrote.
The Consumer Data Industry Association, a plaintiff in the lawsuit, praised the judge’s decision. “Information about unpaid medical debts is an important element in assessing a consumer’s ability to pay,” said Dan Smith, the group’s chief executive. “This is the right outcome for protecting the integrity of the system.”
