A federal judge in Texas has blocked a Biden-era rule that would have excluded medical debt from people’s credit reports. The rule, which was issued by the Consumer Financial Protection Bureau (CFPB), would have substantially improved the credit ratings of millions of Americans. However, the judge blocked the rule, saying that the CFPB lacked the authority to issue the rule under the Fair Credit Reporting Act (FCRA).
What Was This Rule?
The rule, which was finalized by the CFPB in January 2025 just before the Trump Administration took office, would have excluded medical debt from people’s credit reports when determining their overall credit score. It would also have prevented lenders from using information related to outstanding medical debt when determining whether to issue a loan. Thus, it also would have made it easier for Americans struggling with medical debt to obtain housing or to get new jobs where credit checks are mandated.
Why Was the Rule Issued?
The CFPB gave several rationales for issuing the rule. First and foremost, they argued that it was unreasonable to penalize Americans for medical debt because it did not otherwise affect their ability to repay other debts. Moreover, they found that medical debt was an issue disproportionately suffered by people of color, indicating its implementation might have had a disparate impact on certain racial minorities, including Black and Latino people.
Why Was it Blocked?
A federal district court judge in Texas blocked the implementation of the rule, stating that the CFPB had no authority to issue it in the first place. He cited the FCRA, which is the federal law that governs credit reports and what should or should not be included on them. As there is no provision granting the CFPB to exclude medical debt from credit reports, the rule exceeded their legal authority, and should not be implemented.
Why Does it Matter?
In practical terms, the impact on many American families will be substantial, as it means their medical debts will continue to burden their credit and keep them from taking out new loans or improving their financial situation. Legally speaking, however, it is an example of the authority of administrative agencies being curtailed by the courts, which has been an ongoing process since the Supreme Court decision in Loper Bright Enterprises v. Raimondo overturned the decades-old Chevron doctrine. It also highlights the importance of planning for possible medical expenses, particularly later in life when chronic medical problems are more likely to appear.
If you or a loved one are dealing with legal issues related to estate planning, or you are dealing with any other issue related to elder law, you will need specialized legal advice. The attorneys at Hobson-Williams, P.C. are skilled in all aspects of elder law, and are dedicated to representing clients with diligence and compassion. To speak to an attorney or to schedule a consultation, call 866-825-1LAW.
