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\n Medical plan cards are seen in Portland, Ore. A federal judge this past week overturned a Consumer Financial Protection Bureau rule that would have removed medical bills from credit reports and prevented lenders from making decisions based on that medical information.<\/p>\n
Jenny Kane\/AP<\/p>\n
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Jenny Kane\/AP<\/p>\n
A federal judge has ruled that medical debt can remain on Americans’ credit reports, cancelling a policy set in place by the Biden administration to help relieve the burden of healthcare expenses weighing on nearly a third of the population.<\/p>\n
The ruling \u2014 handed down by U.S. District Court of Texas’ Eastern District Judge Sean Jordan on Friday \u2014 was a major blow to the Consumer Financial Protection Bureau (CFPB), which has fought against medical debt as a metric of credit worthiness.<\/p>\n
In the waning days of the Biden administration in January, the federal banking and financial services watchdog introduced a rule<\/a> to disallow medical debts from appearing on American credit reports in effort to keep that information from influencing lenders that consider medical expenses to assess borrowers’ merit.<\/p>\n “People who get sick shouldn’t have their financial future upended,” then-CFPB Director Rohit Chopra said at the time<\/a>. “The CFPB’s final rule will close a special carveout that has allowed debt collectors to abuse the credit reporting system to coerce people into paying medical bills they may not even owe.”<\/p>\n Credit scores factor into a person’s ability to rent or buy a home, secure a car loan, and other major financial decisions that can determine one’s socioeconomic footing.<\/p>\n In its January order the CFPB cited its 2014 research<\/a> which found that medical debt was not a good indicator as to whether or not a borrower would default on loans, and therefore, was not a necessary inclusion on credit reports.<\/p>\n But Cornerstone Credit Union League, which brought suit<\/a> against the agency that same month, argued that the CFPB’s order had exceeded the independent agency’s authority.<\/p>\n Judge Jordan agreed, writing in his decision<\/a> last week that every major “substantive provision of the Medical Debt Rule” had breached the reach of the CFPB’s jurisdiction.<\/p>\n Following Jordan’s ruling, certain advocacy groups decried the move as a blow to the millions who carry medical debt.<\/p>\n “This ruling is a disappointing setback\u2014but it will not stop the growing movement to protect people from the financial harm of medical debt,” Colin Reusch, policy director at Community Catalyst, a nonprofit that advocates for health care affordability<\/a>, said in a statement.<\/p>\n “A court sided with corporate profiteers, rather than the public.”<\/p>\n But the Consumer Data Industry Association (CDIA), a trade association representing some of the nation’s major credit bureaus, said the judge’s ruling will help protect lenders against granting loans to borrowers unlikely to make good on their debts.<\/p>\n “America’s financial system is the best in the world because it is based on a full, fair and accurate credit reporting system,” CDIA president and CEO Dan Smith said in a statement to NPR. “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.”<\/p>\n An estimated 100 million U.S. citizens carry healthcare debt, according to an investigation by Kaiser Health News and NPR<\/a>, creating a problem that is uniquely American<\/a>. Those with high health care debts<\/a> are at risk of homelessness and other hardship.<\/p>\n More than a dozen states<\/a> have introduced laws to keep medical debt from affecting U.S. consumers’ credit, but the topic remains controversial.<\/p>\n Congressional Republicans have denounced the CFPB’s attempts to erase medical debt from credit reports. And onetime Trump ally and former Department of Government Efficiency orchestrator<\/a> Elon Musk has called for the elimination of the agency altogether.<\/p>\n