A federal judge has approved a motion allowing two individuals and two consumer advocacy organizations to intervene in the legal fight over the Consumer Financial Protection Bureau’s rule banning medical debt from consumer credit reports.
Why it matters: The intervention ensures continued legal defense of the rule after the CFPB, under new leadership, reversed course and asked the court to vacate the regulation. The consumer groups say the rule is critical to protecting millions of Americans burdened by medical debt from being unfairly penalized in credit decisions.
The backstory:
- The CFPB finalized the rule this past January, in the waning days of the Biden administration. It prohibited credit reporting agencies from including medical debt in reports and barred lenders from considering medical bills when making credit decisions. The CFPB was then sued twice to block the rule from going into effect.
- The rule was challenged in January by the Consumer Data Industry Association (CDIA) and Cornerstone Credit Union League, which claimed the rule violated provisions of the Fair Credit Reporting Act.
- In late April, the CFPB joined the plaintiffs in seeking to vacate the rule, acknowledging it exceeded the Bureau’s statutory authority.
Latest development:
- Last week, District Court Judge Sean Jordan granted a joint motion allowing Harvey Coleman, David Deeds, and advocacy groups Tzedek DC and the New Mexico Center on Law and Poverty to intervene in the case.
- The court also extended the stay of the rule’s effective date and approved a briefing schedule that will allow the intervenors to oppose the consent judgment and preliminary injunction requested by the original plaintiffs and the CFPB.
What they’re saying:
- “We intervened in this case for this exact purpose: to defend the CFPB’s rule where the current CFPB would not,” said Ariel Levinson-Waldman, Founding President of Tzedek DC.
- “This rule would help me and my family by getting medical debt off my credit report,” said Harvey Coleman, one of the intervening consumers.
- Jennifer Wagner of the National Consumer Law Center added, “We appreciate the Court allowing us to stand up for ordinary people left behind as the current Administration turns its back on consumers.”
What’s next:
- The intervenors must file their briefs opposing the proposed consent judgment and injunction by May 21, with replies from the plaintiffs and the CFPB due by May 30.
- A hearing on the motions is expected to be scheduled thereafter.
The bottom line: Though the CFPB has stepped back, the rule’s fate will now hinge on arguments made by consumer groups determined to see it preserved. The legal showdown continues, with the credit reporting landscape—and access to credit for millions — hanging in the balance.
