A U.S. judge in Texas has struck down a recent rule that aimed to remove medical debt from credit reports. The rule was introduced in January during the final days of President Joe Biden’s term. It was designed to help Americans with medical debt gain better access to credit.
Judge Sean Jordan, appointed by former President Donald Trump in 2019, ruled that the Consumer Financial Protection Bureau (CFPB) went beyond its legal powers. He sided with financial industry groups and current CFPB leaders who had opposed the regulation.
The judge said the regulation clashed with a 2003 law that governs how credit reports should be handled. In his written decision, he noted that canceling the rule was the right legal step.
Financial groups were quick to applaud the decision. Dan Smith, the president of the Consumer Data Industry Association, said the ruling protects the quality of the credit system. He also argued that medical debt is still a useful tool to judge a person’s ability to repay loans.
The rule that was overturned had been strongly supported by former Vice President Kamala Harris. She had cited CFPB research, which showed that many people did not choose to go into medical debt. Instead, their debts came from emergencies or unexpected illness.
Harris argued that this kind of debt was not a good measure of someone’s financial responsibility. She said the rule was meant to help people secure loans for key needs, such as buying a home or a car. Had it stayed in place, the rule would have removed around $49 billion in medical debt from credit records. This could have helped about 15 million Americans.
Medical debt has long been a problem in the U.S. Millions of Americans face bills from hospitals and doctors, often due to a single health crisis. These debts can hurt credit scores and make it harder to get loans, rent apartments, or even apply for jobs.
Supporters of the Biden rule said it was a small step toward fixing this problem. They argued that removing medical debt from credit reports would give people a fairer shot at financial recovery.
Opponents, however, said that such debt should remain visible. They argued it shows whether a person might struggle to pay future bills. They also raised concerns that removing the debt might harm lenders who rely on full credit histories to decide on loans.
Judge Jordan’s ruling now blocks the CFPB from enforcing the rule. The court found that the bureau does not have the authority to decide what kinds of debts can or cannot be shown on credit reports. That authority, the court said, belongs to Congress.
Legal experts say this case could have long-term effects on how financial regulations are written and enforced. It also marks a major win for those who want less government involvement in the credit reporting system.
The CFPB has not said yet whether it will appeal the ruling. For now, the court’s decision means medical debt will continue to be included in credit reports, unless Congress passes a new law to change that.
This outcome marks another example of courts limiting the reach of federal agencies. It also highlights the ongoing battle between efforts to protect consumers and demands from the financial industry to preserve traditional credit systems.
