Latest news with #CFPBruling
Washington Post
21 hours ago
- Business
- Washington Post
Federal judge reverses rule that would have removed medical debt from credit reports
NEW YORK — A federal judge in Texas removed a Biden-era finalized rule by the Consumer Financial Protection Bureau that would have removed medical debt from credit reports. U.S. District Court Judge Sean Jordan of Texas's Eastern District, who was appointed by President Donald Trump, found on Friday that the rule exceeded the CFPB 's authority. Jordan said that the CFPB is not permitted to remove medical debt from credit reports according to the Fair Credit Reporting Act, which protects information collected by consumer reporting agencies.
Fast Company
a day ago
- Business
- Fast Company
Your credit score could be negatively impacted by this controversial court ruling about medical debt
Last Friday, a federal judge axed a Biden-era rule from the Consumer Financial Protection Bureau (CFPB) that would have prohibited consumer credit reporting agencies from including certain medical debts on consumer credit reports. The CFPB rule amended a Fair Credit Reporting Act (FCRA) regulatory exception that allowed creditors to obtain and use information on medical debts. The rule had been finalized shortly before the Biden administration left office and was set to take effect on March 15. However, legal challenges delayed its start date. The rule prohibited creditors from considering medical information when determining credit eligibility and restricted credit reporting agencies from including certain types of medical debt information in consumer credit reports. Medical debt will stay on credit reports On July 11, 2025, U.S. District Judge Sean Jordan of the Eastern District Court in Texas reversed the Biden-era rule. In his opinion, Jordan, a Trump appointee, said that the court found that rule exceeded the CFPB's authority under the FCRA. The federal lawsuit was filed on January 7, the same day the Biden-era rule had been finalized. In the legal complaint, the Cornerstone Credit Union League and the Consumer Data Industry Association asserted that the rule violated the law and that only Congress had the authority to make such changes. The Trump-era CFPB, along with acting director Russell Vought, joined the lawsuit on April 30, with the agency asking the court to vacate the rule. In response to the ruling, Senate Democrats led by Raphael Warnock of Georgia wrote a letter to Vought asking for an explanation about the reversal. 'Medical debt collections information is often inaccurate, and studies show that it is not useful in determining a consumer's ability to repay other debts,' the senators wrote. Fast Company reached out to CFPB for comment. Court order impacts millions of Americans with medical debt CFPB research found that a medical bill on a credit report isn't a good indicator of a person's ability to repay a loan. Research also showed that medical debt on credit reports contributed to mortgage application denials for loans that consumers would have been able to afford. In its January announcement, the CFPB stated that the rule would remove an estimated $49 billion in medical bills from credit reports and affect approximately 15 million Americans. It added that people with medical debt on their credit reports could see an average boost of 20 points on their score. However, now that the rule has been reversed, debt will remain on consumer credit reports, and creditors are still allowed to consider medical debt when making credit decisions.
Fast Company
a day ago
- Business
- Fast Company
You credit score could be negatively impacted by this controversial court ruling about medical debt
Last Friday, a federal judge axed a Biden-era rule from the Consumer Financial Protection Bureau (CFPB) that would have prohibited consumer credit reporting agencies from including certain medical debts on consumer credit reports. The CFPB rule amended a Fair Credit Reporting Act (FCRA) regulatory exception that allowed creditors to obtain and use information on medical debts. The rule had been finalized shortly before the Biden administration left office and was set to take effect on March 15. However, legal challenges delayed its start date. The rule prohibited creditors from considering medical information when determining credit eligibility and restricted credit reporting agencies from including certain types of medical debt information in consumer credit reports. Medical debt will stay on credit reports On July 11, 2025, U.S. District Judge Sean Jordan of the Eastern District Court in Texas reversed the Biden-era rule. In his opinion, Jordan, a Trump appointee, said that the court found that rule exceeded the CFPB's authority under the FCRA. The federal lawsuit was filed on January 7, the same day the Biden-era rule had been finalized. In the legal complaint, the Cornerstone Credit Union League and the Consumer Data Industry Association asserted that the rule violated the law and that only Congress had the authority to make such changes. The Trump-era CFPB, along with acting director Russell Vought, joined the lawsuit on April 30, with the agency asking the court to vacate the rule. In response to the ruling, Senate Democrats led by Raphael Warnock of Georgia wrote a letter to Vought asking for an explanation about the reversal. 'Medical debt collections information is often inaccurate, and studies show that it is not useful in determining a consumer's ability to repay other debts,' the senators wrote. Fast Company reached out to CFPB for comment. Court order impacts millions of Americans with medical debt CFPB research found that a medical bill on a credit report isn't a good indicator of a person's ability to repay a loan. Research also showed that medical debt on credit reports contributed to mortgage application denials for loans that consumers would have been able to afford. In its January announcement, the CFPB stated that the rule would remove an estimated $49 billion in medical bills from credit reports and affect approximately 15 million Americans. It added that people with medical debt on their credit reports could see an average boost of 20 points on their score. However, now that the rule has been reversed, debt will remain on consumer credit reports, and creditors are still allowed to consider medical debt when making credit decisions.
CNN
a day ago
- Health
- CNN
Judge nixes a Biden rule in order to keep medical debt on credit reports
Source: CNN Americans' unpaid medical bills will remain on their credit reports after a federal judge last week vacated a Biden-era Consumer Financial Protection Bureau (CFPB) rule that would have removed such debt. Judge Sean Jordan of the US District Court of Texas' Eastern District found that the rule exceeded the bureau's authority under the Fair Credit Reporting Act, agreeing with the arguments of two industry associations, which had filed a lawsuit against the rule that was later joined by the Trump administration. The court found that 'every major substantive provision of the Medical Debt Rule' exceeded the CFPB's authority, Jordan, a President Donald Trump appointee, wrote in his opinion. The rule, which the bureau finalized shortly before the Biden administration left office in January, would have removed an estimated $49 billion in medical bills from the credit reports of about 15 million people. It would have also banned lenders from using certain medical information in loan decisions. The rule also would have prohibited lenders from using medical devices, such as wheelchairs or prosthetic limbs, as collateral for loans and barred them from repossessing the devices if patients were unable to repay the loans. However, lenders would have been able to continue to consider medical information in certain situations, including when a consumer requests a loan to pay health expenses or asks for a temporary postponement of loan payments for medical reasons. Those with medical debt on their credit reports could have received a 20-point boost, on average, in their credit score, the bureau said when issuing the rule in January. Also, the rule was expected to lead to the approval of about 22,000 additional mortgages every year. Medical debt on credit reports is not a good predictor of a person's ability to pay other loans, the bureau's research has found. Plus, health care bills often contain mistakes, which can lead to extended battles between patients, health insurers and medical providers. Republican lawmakers voiced opposition to the rule soon after it was proposed last August. Several House Republicans wrote to Rohit Chopra, the bureau's director at the time, to express their 'serious concerns' that the proposed rule would 'weaken the accuracy and completeness of consumer credit reports.' They argued that it would undermine underwriting processes, increase risk in the financial system and harm access to and the affordability of credit for consumers, particularly lower-income Americans. The Consumer Data Industry Association, one of the plaintiffs in the case, applauded Jordan's decision, saying the rule would have meant that 'lenders would potentially have had an inaccurate and incomplete picture when making lending decisions.' 'America's financial system is the best in the world because it is based on a full, fair and accurate credit reporting system,' Dan Smith, the association's CEO, said in a statement. 'Information about unpaid medical debts is an important element in assessing a consumer's ability to pay. This is the right outcome for protecting the integrity of the system. The judge affirmed that the CFPB does not have the ability to write law — that is the job of Congress, ACA International, which represents credit and collection professionals, said in a statement. The association, which had also filed a lawsuit against the bureau's rule, said the rule would have forced lenders to reduce access to credit and prompted health care providers to require upfront payments. A group of 30 Democratic and independent senators, however, say the rule would have helped consumers without reducing the accuracy of credit scores. They wrote a letter to Russell Vought, the bureau's acting director, requesting information about its decision to ask the court to vacate the rule, including any communications with debt collection agencies. The industry has also taken steps to reduce the impact of medical debt on people's credit histories. In 2022, the three largest credit reporting agencies — Equifax, Experian and TransUnion — announced they would remove nearly 70% of medical debt from consumer credit reports. The agencies no longer include medical debt that went to collections on consumer credit reports once it has been paid off. That eliminated billions of dollars of debt on consumer records. In addition, unpaid medical debt no longer appears on credit reports for the first year, whereas the previous grace period was six months. That gives people more time to work with their health insurers or providers to address the bills. And medical collection debt of less than $500 is no longer included on credit reports. Plus, FICO and VantageScore reduced the degree to which unpaid medical bills impact credit scores. See Full Web Article
Associated Press
a day ago
- Business
- Associated Press
Federal judge reverses rule that would have removed medical debt from credit reports
NEW YORK (AP) — A federal judge in Texas removed a Biden-era finalized ruled by the Consumer Financial Protection Bureau that would have removed medical debt from credit reports. U.S. District Court Judge Sean Jordan of Texas's Eastern District, who was appointed by Trump, found on Friday that the rule exceeded the CFPB 's authority. Jordan said that the CFPB is not permitted to remove medical debt from credit reports according to the Fair Credit Reporting Act, which protects information collected by consumer reporting agencies. Removing medical debts from consumer credit reports was expected to increase the credit scores of millions of families by an average of 20 points, the bureau said. The CFPB states that its research has shown outstanding healthcare claims to be a poor predictor of an individual's ability to repay a loan, yet they are often used to deny mortgage applications. The three national credit reporting agencies — Experian, Equifax, and TransUnion — announced last year that they would remove medical collections under $500 from U.S. consumer credit reports. The CFPB's rule was projected to ban all outstanding medical bills from appearing on credit reports and prohibit lenders from using the information. The CFPB estimated the rule would have removed $49 million in medical debt from the credit reports of 15 million Americans. According to the agency, one in five Americans has at least one medical debt collection account on their credit reports, and over half of the collection entries on credit reports are for medical debts. The problem disproportionately affects people of color, the CFPB has found: 28% of Black people and 22% of Latino people in the U.S. carry medical debt versus 17% of white people. The CFPB was established by Congress after the 2008 financial crisis to monitor credit card companies, mortgage providers, debt collectors and other segments of the consumer finance industry. Earlier this year, the Trump administration requested that the agency halt nearly all its operations, effectively shutting it down. — 'The Associated Press receives support from Charles Schwab Foundation for educational and explanatory reporting to improve financial literacy. The independent foundation is separate from Charles Schwab and Co. Inc. The AP is solely responsible for its journalism.'
