In a striking policy reversal, the Consumer Financial Protection Bureau (CFPB) has formally asked a federal court to vacate its own rule that would have banned medical debt from appearing on consumer credit reports.
This move, announced in a joint court filing on April 30, 2025, aligns the CFPB with industry groups that had previously sued to block the regulation.
So, what does this mean for the credit industry and consumers in the US? Let’s take a look at the details.
What was the medical debt rule?
The rule, finalised in January 2025 during the Biden administration, was designed to:
- Prohibit lenders from considering medical debt when making lending decisions
- Ban credit reporting agencies from including medical debt information on credit reports and scores
Had it taken effect, the rule was expected to remove up to $49 billion in medical debt from the credit reports of 15 million Americans.
The regulation was originally set to be implemented in March, but legal challenges delayed its implementation until at least June 15, 2025.
Why the sudden reversal?
The CFPB’s reversal came as it joined the Cornerstone Credit Union League and the Consumer Data Industry Association (two industry groups that had sued to block the rule) in asking the court to strike it down.
In their joint motion, the parties argued that the rule “exceeds the bureau’s authority and is contrary to law”, specifically citing the Fair Credit Reporting Act, which they say permits reporting of coded medical debt and allows creditors to consider it when making lending decisions.
A memo from the CFPB’s chief legal officer indicated the agency will now deprioritise enforcement in areas like medical debt, shifting focus to cases involving clear consumer damages such as fraud.
What happens next?
The court will decide whether to formally vacate the rule based on the agreement between the CFPB and industry groups. If the judge agrees, the regulation will be nullified before it ever takes effect, and medical debt will continue to appear on credit reports and influence lending decisions.
Consumer advocacy groups are seeking to intervene in the proceedings to defend the rule, but the outcome remains uncertain.
How will this affect consumers and the industry?
- Consumers: If the rule is vacated, millions of Americans could continue to see medical debt affect their credit scores and access to loans.
- States: Several states, including California, Colorado, Connecticut, and New York, have enacted their own restrictions on medical debt reporting, and more may follow, but the federal landscape is now in flux.
- Credit industry: Credit bureaus and lenders argue that access to all debt information, including medical debt, is necessary for accurate credit assessments, while consumer advocates warn this reversal could harm financially vulnerable Americans.
Summary
The CFPB’s request to scrap its own medical debt reporting ban marks a significant shift in federal consumer protection policy. The fate of the rule, and the credit profiles of millions, now rests with the courts, as the debate over the role of medical debt in credit reporting continues.
Discuss your collections and recoveries needs with our experts
Arum has a global team of specialists in collections and recoveries that can assist you with your technology, strategy and operational needs and help you to deliver good customer outcomes.
Sign up to our newsletter for more insights
Contact me directly
Request a callback from one of our experts
About the author
Nick Walsh
Principal Consultant, Global Advisory
Nick, a seasoned collections and recoveries professional, boasts over four decades of experience both domestically and internationally. His expertise has empowered numerous organisations, spanning various sectors and sizes, to swiftly adopt an optimal operating model tailored to their unique needs. This tailored approach carefully balances regulatory compliance with organisational limitations, whilst charting a more strategic roadmap for improvement. Nick, and Arum, ensure good outcomes for customers are prioritised in all the client engagements we undertake.