On May 1, the CFPB filed a joint motion with two financial trade groups to vacate a Biden-era rule barring most medical debt from appearing on consumer credit reports. The motion comes after lender groups filed a lawsuit in January, arguing that the rule unlawfully exceeded the CFPB’s statutory authority under the Fair Credit Reporting Act (FCRA).
The vacated rule would have removed an estimated $49 billion in medical debt from credit reports. The rule would have also barred creditors from considering medical debt in credit decisions and prohibited consumer reporting agencies (CRAs) from furnishing coded medical debt data for such purposes.
According to the joint filing, the CFPB’s rule contradicted express statutory permission by not allowing CRAs to furnish, and creditors to use, medical debt data if it coded to conceal health details. In addition, the rule allegedly rested on outdated and limited evidence, and would have imposed significant compliance costs and degrade the utility of consumer credit reports by suppressing accurate, non-identifying information about borrowers obligations.
Putting It Into Practice: The CFPB’s request to vacate its own medical debt reporting rule marks another example of the Bureau narrowing its regulatory focus under new leadership (previously discussed here and here). Credit reporting agencies should continue to monitor CFPB related developments and assess whether compliance updates are needed.