Federal Judge Reverses Medical Debt Rule: Last week, a federal judge in Texas made a decision that’s sending ripples through the lives of about 15 million Americans. The ruling, handed down by U.S. District Judge Sean Jordan on July 11, 2025, overturned a Biden-era regulation aimed at removing medical debt from credit reports. This policy, finalized by the Consumer Financial Protection Bureau (CFPB) in January 2025, was meant to ease the financial burden for those struggling with medical bills. Now, with the rule vacated, many are left wondering what’s next. Let’s break it down.
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The Biden-Era Rule and Its Promise
The original regulation was a beacon of hope for millions. It aimed to wipe roughly $49 billion in medical debt from the credit reports of about 15 million Americans. The CFPB argued that medical debt, often incurred due to unexpected illnesses or accidents, doesn’t accurately reflect someone’s ability to repay other loans. Former Vice President Kamala Harris championed the rule, emphasizing that it could boost credit scores by an average of 20 points. This, in turn, could have opened doors to better loan terms, more affordable housing, and even job opportunities, as some employers check credit scores. The rule was set to take effect by the end of July, offering a lifeline to those weighed down by medical bills. But then came the reversal.
Why the Rule Was Overturned
Judge Sean Jordan, a 2019 Trump appointee, ruled that the CFPB overstepped its authority under the Fair Credit Reporting Act (FCRA). The FCRA, amended in 2003, allows credit bureaus to include coded medical debt information in reports, as long as it doesn’t reveal specific health details. Jordan argued that the CFPB’s attempt to ban medical debt from credit reports essentially rewrote the law, a power reserved for Congress. The Trump administration and credit industry groups, including major players like Experian, Equifax, and TransUnion, backed the challenge. They claimed that excluding medical debt could paint an incomplete picture of a borrower’s financial health, potentially increasing risks for lenders. This argument swayed the court, leading to the rule’s demise.
The Impact on Everyday Americans
For the 15 million Americans who were set to benefit, this ruling is a gut punch. Medical debt is a massive issue—about one in 12 adults carries at least $250 in unpaid medical bills. These debts can tank credit scores, making it harder to secure loans, rent apartments, or even buy a car. The Biden rule promised relief, potentially enabling 22,000 more mortgages annually. Now, those hopes are on hold. Consumer advocates are sounding the alarm, warning that this could deepen financial inequality, especially for lower-income households. Some states have tried to ban medical debt reporting, but Jordan’s ruling also preempts those laws, leaving consumers with fewer protections. The decision underscores a harsh reality: medical emergencies can still haunt your financial future.
What Happens Now?
The future of medical debt relief is murky. Consumer advocacy groups are pushing for Congress to pass clear legislation allowing the CFPB to exclude medical debt from credit reports, but bipartisan support in today’s polarized climate is a tall order. The CFPB, now under new leadership, has backed off defending the rule, and the Justice Department isn’t appealing the decision. Some suggest the CFPB could encourage creditors to voluntarily ignore medical debt, but that’s a far cry from a mandatory regulation. Meanwhile, the ruling aligns with broader efforts to curb federal agency power, a priority for the Trump administration. For now, those with medical debt face higher borrowing costs and limited options, while advocates continue to fight for change.
This decision highlights the ongoing tug-of-war between consumer protections and industry interests. As the debate continues, millions are left navigating a system where a single hospital bill can derail their financial stability. Keep an eye on Congress and state legislatures for any moves to address this issue—it’s a story that’s far from over.