- By Sakshi Srivastava
- Tue, 15 Jul 2025 12:15 PM (IST)
- Source:JND
US medical debt: A federal judge in Texas has thrown a wrench into the financial lives of nearly 15 million Americans by reversing a Biden-era rule that aimed to remove USD 50 million of medical debt from credit reports. The decision, handed down on July 11, 2025, by US District Judge Sean Jordan, targets a policy finalised by the Consumer Financial Protection Bureau (CFPB) in January, just before President Joe Biden left office.
Judge Jordan ruled that the Fair Credit Reporting Act does not grant the CFPB authority to eliminate medical debt from credit reports. The move effectively kills a measure that could have boosted credit scores by an average of 20 points, enabling approximately 22,000 additional mortgage approvals each year. For millions of Americans, this reversal translates to higher borrowing costs, reduced access to loans, and increased financial pressure.
How the Ruling Hits Ordinary Americans?
The ruling disproportionately affects Americans burdened by unpaid medical bills—often arising from unexpected health emergencies. The CFPB’s original plan didn’t forgive the debt but intended to change how credit bureaus report it, protecting credit scores from being dragged down by one-time medical expenses.
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With the rule now overturned, around 15 million Americans will continue to see their unpaid medical debt reflected on their credit profiles. This will likely lead to higher interest rates on mortgages, car loans, and credit cards—especially damaging for lower-income families who are already stretched thin by rising healthcare costs. Experts had predicted that the rule would have had a widespread positive effect, improving creditworthiness for millions and promoting better access to housing and essential credit. That relief is now off the table.
Industry Pushback VS Consumer Advocacy
Consumer advocates have expressed concern that the ruling could widen inequality, particularly among households that are already financially vulnerable. They argue that medical debt is a poor predictor of financial behavior, given its typically unforeseen and non-recurring nature.
On the other side, credit industry groups such as the Consumer Data Industry Association have welcomed the decision. They maintain that medical debt—regardless of its origin—offers insight into a borrower’s repayment capacity. Interestingly, Judge Jordan did note that the CFPB could still “encourage” creditors to use alternative data when assessing creditworthiness. However, this suggestion lacks legal enforceability, rendering it more symbolic than actionable.
What Lies Ahead For The CFPB And Affected Americans?
So far, there has been no indication of an appeal, particularly with the Trump administration now in power and unlikely to defend a Biden-era regulation. Legal experts suggest the CFPB may explore new rulemaking that fits within its more limited statutory powers—possibly redefining how medical debt is categorized or nudging voluntary industry reform.
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That said, with a conservative judiciary and growing efforts to limit federal agency power, these options may face stiff legal and political resistance. While Congress could intervene through legislation to protect consumers from the impact of medical debt, deep partisan divisions make this an unlikely near-term solution. For individuals affected by the ruling, the focus now shifts to monitoring credit reports for accuracy and seeking out debt management options, such as negotiating with healthcare providers or turning to nonprofit credit counseling services.
Some US states have already taken steps to ban the reporting of medical debt on credit reports, and this ruling may accelerate such efforts at the state level. However, federal preemption laws could limit the extent to which state actions can protect consumers.
