Federal Agency Removes Overdue Medical Expenses from Credit Records
The Consumer Financial Protection Bureau's (CFPB) rule banning medical debt from credit reports has been vacated, following a federal court ruling in July 2025. The decision has raised concerns among consumer advocates, as medical debt can once again appear on credit reports and be used by lenders.
The rule, finalized in January 2025, prohibited consumer reporting agencies (CRAs) from including medical debt information in credit reports used for credit decisions and barred creditors from considering medical debt in lending decisions. However, a U.S. District Court in the Eastern District of Texas found the CFPB lacked the authority to impose such a ban, effectively reversing the rule.
The court ruling followed a challenge to the rule, which was co-sponsored by Senator Marco Rubio in a 2022 bill seeking to impose curbs on data brokers. In a recent development, a version of this bill has become a CFPB policy.
The CFPB, under new leadership, agreed not to defend the rule in court and jointly requested the court to enter final judgment vacating the rule. This means the rule will not survive the current administration, and there is currently no indication it will be reinstated or survive legal challenges.
The decision comes at a time when medical debt has been a significant concern for many Americans. Between August 2022 and August 2023, the percentage of consumers with medical debt on their credit reports dropped from 11.6% to 5.0%, according to research from the Urban Institute. However, consumers frequently report receiving inaccurate medical bills or being asked to pay charges that should have been covered by insurance or financial assistance programs.
The elimination of the rule has raised concerns among consumer advocates, given the financial burdens medical debt imposes on millions of Americans. The CFPB's decision has garnered support from both Republicans and Democrats, with majorities in both parties backing the new rules on medical debt.
However, the Republicans, who will control both chambers of Congress, have the power to overturn these last-minute rules through the Congressional Review Act. Credit agencies have been aware of this issue for years and have already cut back on the amount of medical debt included on credit reports.
In recent weeks, the CFPB has introduced several actions to ensure new regulations are implemented before the transition. The newer credit scoring models, which weighed medical debt less heavily, resulted in an average 25-point increase in FICO scores. The CFPB also instituted a 365-day waiting period before unpaid medical debts affect a consumer's credit record.
Despite the court decision, the CFPB's new policies on data brokers have gained support from Senator Marco Rubio, who co-sponsored a bill seeking similar curbs in 2022. The CFPB's decision to scrutinize digital payment apps like Apple Pay and Venmo in the same way as other lenders has also gained support from an advisor to Vice President-elect Vance.
As the transition continues, it remains to be seen whether the CFPB will revisit the issue of medical debt and credit reports. In the meantime, consumers are advised to carefully review their medical bills and seek assistance if they believe there are errors or unjust charges.
- The vacation of the Consumer Financial Protection Bureau's (CFPB) rule banning medical debt from credit reports has sparked concerns within the health-and-wellness sector, given the potential financial impact of medical-conditions on millions of Americans.
- As the CFPB focuses on new policies regarding data brokers and digital payment apps, the financial industry is closely watching the possible re-evaluation of medical debt and credit reports, which could be a significant development in the general-news realm.
