A U.S. District Court judge in Texas has approved a joint request to vacate a federal medical debt rule that would have excluded medical bills from credit reports, according to court documents.
The rule, proposed during the Biden administration and finalized by the Consumer Financial Protection Bureau in January, would have barred lenders from considering medical information when making credit decisions and prohibited consumer reporting agencies from including medical debt on credit reports.
U.S. District Judge Sean Jordan ruled July 11 that the rule exceeded the CFPB’s authority under the Fair Credit Reporting Act.
Two trade associations sued the CFPB after the rule was finalized, alleging it overstepped the agency’s authority. The bureau, under new leadership by the Trump administration, later requested a stay and the court postponed the rule’s effective date. The agency and trade groups then jointly filed a motion for consent judgment, agreeing the rule should be vacated.
The CFPB had estimated the rule would remove about $49 billion in medical bills from the credit reports of about 15 million Americans.
Dan Smith, president and CEO of the Consumer Data Industry Association, told Reuters in July that medical debt plays a role in assessing credit risk. “This is the right outcome for protecting the integrity of the system,” he said in a statement to the news outlet.
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