The Consumer Financial Protection Bureau has agreed to end a lawsuit by joining industry groups in asking a federal judge to vacate its controversial rule banning the reporting of medical debt on consumer credit reports.
Background:
- The rule, finalized in January 2025 during the final days of the Biden administration, barred credit reporting agencies from including medical debt on consumer reports and prohibited lenders from considering medical information when making credit decisions.
- It was challenged in court by the Consumer Data Industry Association and the Cornerstone Credit Union League, who argued the rule exceeded the CFPB’s authority under the Fair Credit Reporting Act.
- In February, a Texas federal judge stayed the rule’s effective date to June 15, pending the outcome of the litigation.
Latest developments:
- On April 30, the CFPB and the plaintiffs jointly moved for entry of a consent judgment.
- In the motion, both sides agreed that the Medical Debt Rule violated federal law because:
- It prohibited credit reporting agencies from reporting properly coded medical debt.
- It barred creditors from using such information.
- It improperly limited the types of information credit reporting agencies could furnish based on state laws, exceeding the CFPB’s authority.
- The CFPB acknowledged that the rule was “contrary to law” and requested the court to vacate it entirely.
Between the lines:
- Lawmakers in Congress have also introduced a Congressional Review Act resolution seeking to overturn the rule. Trade groups have supported the resolution, arguing the rule would hurt access to credit by suppressing important borrower risk information.
What they’re saying:
- In the joint filing, the parties wrote: “Nothing authorizes an agency to modify unambiguous requirements imposed by a federal statute.”
- They further agreed that the CFPB could not fix the rule through additional rulemaking because it fundamentally conflicted with existing law.
What’s next:
