CFPB supports trade groups and asks judges to remove rules for medical debt
The Consumer Financial Protection Agency asked judges to remove Biden-era rules aimed at maintaining medical debt from their credit reports.
The Consumer Financial Protection Agency is trying to eliminate Biden-era rules that prohibit the inclusion of medical debts in credit reports.
The Consumer Protection Agency sided with the Consumer Data Industry Association and the Cornerstone Credit Union League————————————————————————————————————————————————————————————————————————————-
Medical debt rules set forth on the Biden administration’s decline date will prohibit medical obligations on credit reports and prohibit lenders from using a person’s medical debt history to make loan decisions.
The rule was scheduled to come into effect in March, but two trade groups sued the CFPB and suspended the rule, with a US District Court judge in the Eastern District of Texas issued a 90-day stay and effectively postponed the rule’s opening date until June 15th.
Rather than defending the rules, the CFPB filed joint claims with two trade groups. This has been asked District Court Judge Shawn Jordan to eliminate medical debt rules “because it exceeds the department’s statutory authority.”
Consumers fight to maintain medical debt rules
Consumer groups are trying to intervene in the case to comply with medical debt regulations. In an order on April 30, Jordan said it would file legal documents for another week with consumer groups, industry groups and CFPB before deciding on the next step.
The CFPB is also the subject of another court challenge from employees fighting the Trump administration’s efforts to effectively shut down the Consumer Protection Agency. The fight for the future of CFPB raises questions about efforts to curb bank overdraft fees and monitoring digital payment apps.
Consumer advocates worry that CFPB’s choice to abandon the health debt rules could remove a key layer of consumer protection.
“We’ve been working hard to get into the world,” said Patricia Kelmer, senior director of the healthcare campaign at the US PIRG Education Fund.
However, the Consumer Data Industry Association, which represents the Credit Bureau, supported the CFPB’s choice not to defend the medical debt regulations.
“We’re looking forward to seeing you in the future,” said Dan Smith, president and CEO of the association. “Our member companies remain committed to supporting lenders and providing complete and accurate information to provide consumers with access to financial products.”
According to a 2022 report from the CFPB, health costs account for more than half of debt collections on consumer credit records.
The three biggest credit reporting companies have already removed several forms of debt from their credit reports. Paid medical obligations, unpaid medical obligations of less than one year, and medical obligations of less than $500.
Even if the medical debt rules cannot withstand this court’s challenge, Kelmer said there is bipartisan support for the notion of saving consumers from credit disadvantages due to old medical expenses.
“Medical debt is a nonpartisan issue,” Kelmer said. “It’s going to have more impact on middle-income Americans (because they have to pay more at out-of-pocket costs.”