The Consumer Financial Protection Bureau (CFPB) has reversed its position on a high-profile regulation from the Biden administration, by formally joining the credit reporting industry in a legal request to strike down the Medical Debt Rule — a regulation that would have prohibited the inclusion of medical debt on consumer credit reports.
On Wednesday, April 30th the CFPB filed a joint motion with Cornerstone Credit Union League and the Consumer Data Industry Association (CDIA) asking the court to vacate the rule. These trade groups had originally filed litigation in January to block the rule just hours after it was finalized by former CFPB Director Rohit Chopra.
At the time of its finalization, the CFPB estimated that the rule would have removed approximately $49 billion in medical debt from the credit files of 15 million consumers. It faced strong criticism from Republican lawmakers and industry representatives who argued that it would distort credit assessments and undermine lenders’ ability to make informed decisions.
The motion states: “The parties now agree that . . . the Medical Debt Rule exceeds the Bureau’s authority and is contrary to law.” The court will now consider whether to formally vacate the rule based on their agreement.
How this decision will impact states which have adopted similar restrictions in the past two years is unclear. The following states have adopted some form of medical debt prohibition related to credit reporting: California, Colorado, Connecticut, Delaware, Illinois, Maryland, Minnesota, New Jersey, New York, Rhode Island, Virginia, and Washington. RMAI anticipates some form of medical debt reporting restrictions will also be adopted in Maine, Nevada, Oregon, and Vermont before the end of their 2025 legislative sessions.
RMAI will provide more information on this topic as it becomes available.
Please see related January 7, 2025 Member Alert for additional background on this topic.
This Member Alert is intended for members of the Receivables Management Association International, is for informational purposes only, and is in no way intended to provide legal advice. Members are encouraged to consult with an attorney of their choice for legal advice concerning this matter.