A federal judge in Texas has struck down a Biden-era regulation that would have removed medical debt from credit reports, dealing a blow to nearly 15 million Americans expecting financial relief. The decision is being felt nationwide—especially by those already struggling under medical and debt stress.
What Was the Medical Debt Rule?
In January 2025, the Consumer Financial Protection Bureau (CFPB) finalized a rule that barred credit reporting agencies from including medical debt in credit scores. The goal was to eliminate roughly $49 billion in consumer medical debt and boost credit scores by about 20 points for affected individuals, potentially unlocking thousands of home and auto loan approvals annually.
The Biden administration and advocates framed it as a fix for medical bills that often arise from emergencies outside people’s control. But lenders and credit bureaus opposed the rule, warning it would skew risk assessments.
How the Reversal Happened
On July 11, U.S. District Judge Sean Jordan—a Trump-appointed judicial conservative—ruled that the CFPB overstepped its statutory authority under the Fair Credit Reporting Act. The judge sided with challengers including the Trump-era CFPB leadership and credit industry groups, agreeing that the agency couldn’t legally rewrite what counts on a credit report.
With that judgment, the rule is effectively shelved, meaning medical debt remains on consumer reports as before.
Who Is Impacted
The judge’s decision hits hard:
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Around 15 million Americans who carried medical debt on their credit reports continue facing lower scores.
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That could translate to thousands fewer mortgage approvals and limited access to credit, car loans, and favorable interest rates.
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Data estimates suggest this reversal could block approximately 22,000 mortgages per year.
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Those with medical debt balances of at least $250—about 1 in 12 U.S. adults—now face continued financial strain.
Broader Impact on Medicaid and Debt Relief Efforts
This decision arrives alongside other federal cost-cutting measures. A major spending bill also outlines Medicaid reductions and stricter work requirements, tightening financial pressure on low-income households. In states where hospitals eroded medical bills through Medicaid funding, patients might still see temporary relief—but credit-report protection is off the table.
Why the Rule Matters
Removing medical debt from credit scores was intended to offer a fresh start for those hit by illness or accident. Without it, medical debt drags on for years—even if payments were made. Credit scores are crucial for:
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Mortgage and auto loan eligibility
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Rent applications, security deposit rates
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Insurance premiums and job background checks
Experts argue that continuing to penalize people for medical emergencies violates fairness principles.
Judges vs. Agency Authority
Judge Jordan’s ruling echoes a pattern where courts are scaling back federal agency power—especially regarding regulatory overreach. Similar actions have targeted…
…other 2024–2025 CFPB rules, junk-fee regulations, and clean-energy mandates using the same logic.
But critics say many of those rules protected consumers. Medical debt reform was widely praised by patient advocates, even if undoing it follows a typical “administrative rollback” playbook.
What Happens Next
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The Biden administration can appeal, but options are limited—Congress must explicitly update the law.
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CFPB may pivot to voluntary guidelines, encouraging creditors not to penalize medical debt.
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Consumer groups are backing legislation that would remove medical debt protection from credit reporting law.
Legislative action is the only real path forward right now.
