Court Overturns CFPB’s Medical Debt Rule: A Win for Consumers and the Rule of Law

Why it matters: A federal court has struck down the CFPB’s Medical Debt Rule, delivering a clear message about the limits of regulatory authority and reaffirming the supremacy of federal law under the Fair Credit Reporting Act (FCRA). The court’s decision stops a misguided rule and sends a strong signal to states attempting to bypass federal authority.

Catch me up: In January 2025, the previous CFPB leadership finalized a rule that would have prohibited consumer reporting agencies from including medical debt on credit reports and prohibited creditors from considering the information when making a credit decision. The stated purpose of the rule was to prevent unpaid medical debt from negatively impacting credit scores; however, it would have undermined the risk-based pricing system that promotes responsible lending. Importantly, eliminating information about medical debt on credit report does not eliminate the debt – it simply masks this information from credit providers and other companies. The U.S. Chamber of Commerce has consistently argued that the rule exceeded the CFPB’s statutory authority and would harm consumers by increasing the risk they would be issued a loan they cannot afford.

Our view: The Chamber has long opposed the CFPB’s rule, arguing that it would harm consumers by limiting access to credit and undermining the risk-based pricing system. Risk-based pricing allows lenders to assess a borrower’s ability to repay, ensuring that loans are offered responsibly and at competitive terms. Removing medical debt from credit reports would blind lenders to important financial information, leading to higher borrowing costs and reduced access to credit for many consumers.

The rule would create new financial strain for medical providers by reducing incentives for consumers to make payment. One economist projected that the loss in the first year for medical providers is estimated to be $24 billion. According to another study, “68% of net revenues [of medical providers] are uncompensated for,” and unless “hospitals and healthcare providers can recoup a larger portion of uncompensated revenues, their ability to invest in equipment, provide necessary services and maintain rural facilities may be severely impaired.”

The bottom line: This ruling is a victory for consumers, businesses, and the rule of law. It reinforces the importance of federal preemption in maintaining a consistent and fair credit reporting system while curbing regulatory overreach. For states, the message is clear: the Fair Credit Reporting Act law sets the rules of the road for credit reporting.