A federal judge reversed a Biden-era rule that would have removed medical debt from consumers’ credit reports.

U.S. District Judge Sean Jordan, a Trump appointee, said the rule exceeded the authority of the Consumer Financial Protection Bureau (CFPB) under the Fair Credit Reporting Act.

The Trump administration joined a lawsuit against the rule initially filed by two industry associations.

The Hill provided further details:

The Biden administration estimated that the action would remove nearly $50 billion of medical debt from the credit reports of roughly 15 million Americans.

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In his decision, Jordan argued that the Fair Credit Reporting Act, which was amended in 2003, does not permit the CFPB to remove medical debt from reports. However, per the filing, the bureau can “permit” or encourage creditors to use other categories of information.

Since returning to office, Trump has sought to weed out what his Department of Government Efficiency panel calls “waste, fraud and abuse” within the federal government. The embattled consumer protection agency found itself in the president’s crosshairs early on and was subject to mass layoffs.

The American Economic Liberties Project and The Debt Collective criticized the judge’s ruling.

“Millions of Americans suffering from crushing medical debt are being thrown under the bus — following a court’s decision to vacate the CFPB’s commonsense rule to ban medical debt from credit reports,” the American Economic Liberties Project said.

“Working people in the U.S. owe around $220 billion in medical debt. But a reminder that we canceled about $800 billion in PPP loans during COVID alone. It was never about ‘finding the money.’ It’s about priorities and social control,” The Debt Collective said.

CNN noted:

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.

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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.

 

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