A Texas judge ruled against an embedded rule by the Biden administration that would eliminate unpaid medical debt from showing up on Americans’ credit reports, CNN reports.
Judge Sean Jordan, a President Donald Trump appointee, of the U.S. District Court of Texas’ Eastern District vacated the rule put in place by the Consumer Financial Protection Bureau (CFPB) after finding the rule went above the bureau’s authority due to the Fair Credit Reporting Act. Jordan sided with Consumer Data Industry Association (CDIA), which filed a lawsuit against the rule along with the Trump administration.
Finalized shortly before the Biden left office in early 2025, the rule was established to eliminate an estimated $49 billion in medical bills from the credit reports for close to 15 million Americans and would have banned lenders from using certain medical information to hinder them in loan decisions.
Medical devices such as wheelchairs and prosthetic limbs would also be prohibited from collateral use for loans and barred from repossession if patients failed to repay loans.
If the rule stayed in place, persons with medical debt on their credit reports would have the opportunity to receive an average 20-point boost on their credit score in addition to potentially approving roughly 22,000 additional mortgages per year.
But the rule was met with massive pushback from Republican leaders who sent a letter to the bureau’s then director Rohit Chopra, expressing concern that it would “weaken the accuracy and completeness of consumer credit reports” in addition to undermining underwriting processes and harm access to—and affordability—of credit for consumers, focusing on lower-income Americans.
On the other side of the political aisle, Democratic leaders issued a letter to the current acting bureau leader, Russell Vought, who was behind Project 2025, saying that the rule would assist consumers without decreasing credit score accuracy. Leaders also requested information from Vought on why the request to vacate the rule came about in the first place.
However, according to The Economic Times, CDIA director Dan Smith celebrated the court’s decision, labeling it as the “right outcome for protecting the integrity of the system.”
The decision that Republicans felt would hurt lower-income Americans comes just weeks after the GOP-controlled House passed the “Big, Beautiful Bill” that will gut needed medical programs that the same demographic relies on, such as Medicaid. New work requirements added to the bill, which several elected lawmakers said will help “lazy Americans get off the couch,” could strip millions of their Medicaid coverage.
Unlike some elected officials, the credit industry has taken into account how medical debt affects consumers. In 2022, the Big Three of credit reporting agencies—Equifax, Experian, and TransUnion—made moves to remove close to 70% of medical debt from consumer credit reports.
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