Ongoing Lawsuit Threatens Finalized CFPB Rule to Remove Medical Bills from Credit Reports

In January, the Consumer Financial Protection Bureau (“CFPB”) finalized a rule proposed last year with the potential to have a sweeping impact on the practices of weaponized credit reporting. According to CFPB reporting, the rule would in effect remove about $49 billion in medical bills spanning over roughly 15 million Americans. The rule effectuates a ban on the inclusion of medical bills on credit reports utilized to make lending decisions to potential debtors. Debt relating to medical bills is not a reliable resource in determining the risk associated with lending to an individual, but its inclusion often damages credit scores leaving consumers with few reasonable lending options. With reports indicating that removal of medical debt is associated with an average 20-point increase in credit score for the estimated 15 million Americans with credit scores impacted by medical debt.

In a turn of events, however, since finalizing the rule, the CFPB has formally withdrawn its support, citing concerns that the rule violates a section of the Fair Credit Reporting Act, which allows for the inclusion of medical debt on credit reports, but is limited to reporting only the amount of debt and the status of payment. This opinion shift was published in an April 30th court filing where the CFPB joined industry plaintiffs, the Consumer Data Industry Association and the Cornerstone Credit Union League, in asking the court to vacate the rule. Debtors with unpaid medical bills may have hope yet, as in lieu of enactment of the rule, the reporting industry has already begun to adopt practices of voluntarily omitting medical debt that amounts to less than $500 from their credit reports. 

The rule, which was originally supposed to take effect on March 17, 2025 before being delayed to June 15, 2025, now appears to be in limbo as support for the rule lessens and litigation over the rule continues in court. For now, the inclusion of medical debt on credit reports remains lawful.

Halle A. Hayhurst
Aiden Welsh, Summer Associate