In a major blow to consumer credit reform, a federal judge in Texas has overturned a Biden-era rule that would have removed up to $50 million in medical debt from Americans' credit reports. The decision, issued by U.S. District Judge Sean Jordan on July 11, 2025, affects an estimated 15 million Americans and reverses efforts aimed at improving financial outcomes for people weighed down by medical bills.
The original rule, introduced by the Consumer Financial Protection Bureau (CFPB) just before President Joe Biden left office, didn't cancel medical debt but changed how it was reported—shielding credit scores from being negatively impacted by unpredictable medical expenses. The CFPB had estimated the change could boost credit scores by an average of 20 points and help an additional 22,000 Americans qualify for mortgages annually.
But Judge Jordan, a Trump appointee, ruled that the CFPB had overstepped its legal authority under the Fair Credit Reporting Act, arguing that the law does not give the agency power to unilaterally scrub medical debt from credit histories. While the judge noted the CFPB could still “encourage” lenders to consider alternative credit data, that suggestion holds no legal weight.
Why It Matters to Millions
Medical debt is one of the most common and crushing types of personal debt in the U.S.—and it's rarely planned for. For many families, a single medical emergency can tank a credit score, making it harder to rent housing, get approved for loans, or access affordable interest rates.
The CFPB's now-overturned rule was seen by consumer advocates as a step toward a fairer credit system—one that recognized medical debt as often involuntary and not reflective of someone’s financial responsibility.
Without the rule, those same 15 million Americans will continue to carry the financial stigma of medical debt on their credit reports. This could lead to higher borrowing costs and fewer opportunities to build financial stability, particularly for low-income families and communities already burdened by high healthcare costs.
Industry Cheers, Advocates Push Back
Not surprisingly, industry players like the Consumer Data Industry Association praised the ruling, saying medical debt provides relevant information about a borrower's risk. But consumer groups argue the exact opposite—that this kind of debt is unpredictable, unavoidable, and not a true indicator of someone’s likelihood to repay other debts.
With the Trump administration now back in office, it’s unlikely the federal government will challenge the judge’s ruling. Legal experts suggest the CFPB may pivot to narrower regulatory efforts or industry guidance, but those routes come with limited enforcement power.
What Comes Next?
For now, Americans affected by this ruling are being urged to stay vigilant: regularly check credit reports, negotiate medical bills directly with providers, and seek out nonprofit credit counseling if needed. A handful of states have begun exploring legislation to limit or ban the reporting of medical debt, but federal preemption laws could ultimately curb how far those efforts can go.
In the meantime, a nationwide fix—like new congressional legislation—is unlikely in the current polarized political climate. So, for the millions of Americans still drowning in medical debt, the message is clear: the road to relief just got a lot steeper.
