The CFPB says it wants to scrap a Biden Administration rule that prohibits credit reporting agencies from including medical debts on credit reports, one of many Biden era rules that the Trump Administration has sought to nullify.
The rule had been scheduled to take effect in March, but U.S. District Judge Sean Jordan of the Eastern District of Texas, had issued a 90-day stay. That delayed the rule's effective date until June 15.
Now, the bureau and the industry groups that filed suit challenging the rule say the rule exceeds the bureau's authority.
The two sides now agree that that creditors may report medical debt information to consumer reporting agencies; consumer reporting agencies may include that information in credit reports, as long as it is properly coded; and consumer reporting agencies may furnish credit reports with such properly coded information to creditors for purposes permissible under the Fair Credit Reporting Act (FCRA).
"Creditors may consider medical information that is 'reported using codes that do not identify, or provide information sufficient to infer, the specific provider or the nature of such services, products, or devices to a person other than the consumer,"' they agreed, in a Joint Motion for Entry of a Consent Judgment.
The medical debt rule prohibits credit reporting agencies from reporting debts even if they use codes or information to disguise the nature of the medical treatment.
In the suit, the Consumer Data Industry Association (CDIA) and the Cornerstone Credit Union League, said the CFPB exceeded its authority in issuing the rule. The CDIA, headquartered in Washington, D.C., represents national and regional credit bureaus. The Cornerstone Credit Union League, headquartered in Plano, Texas, represents almost 600 credit unions, including those in Texas.
In their suit, the groups contended that in the closing days of the Biden Administration, the CPB sought to upend "the carefully balanced framework established by Congress with a Final Rule that plainly exceeds its statutory authority."
The groups asked the court to find that the medical debt rule is contrary to federal law. The CFPB now says it agrees with that contention.
Dan Smith, President and CEO of the CDIA said he is pleased with the CFPB's decision.
"America's financial system has taken over 100 years to develop into the best in the world, based on a full, fair and accurate credit reporting system," he said, in a statement. "Information about unpaid medical debts is an important element in assessing a consumer's ability to pay. This is the right outcome for protecting the integrity of that system."
Still outstanding are motions to intervene in the case filed by two organizations that say they help people with medical debt, the New Mexico Center on Law and Poverty and Tzedek DC, and two individuals who say they have medical debt, Harvey Coleman and David Deeds.
In light of those motions, and the joint motion filed by the parties, Judge Jordan issued an order cancelling a scheduled preliminary injunction hearing and giving the parties and proposed intervenors additional time to supplement their briefs on intervention.
On Capitol Hill,Republican lawmakers have introduced Congressional Review Act resolutions to nullify the medical debt rule. Those resolutions are still awaiting further Congressional action.
Sen. Mike Rounds, R-S.D. introduced S. J. Res 36, which also is cosponsored by Senate Banking Committee Chairman Sen. Tim Scott, R-S.C. The resolution, filed under the CRA, could be passed by a simple majority in the House and Senate. It would not be subject to a filibuster in the Senate. Rep. Ralph Norman, R-S.C., has introduced H.J. Res 74, a companion resolution, in the House.
Several states have enacted legislation to exclude medical debts from credit reports, such as California, Colorado, Connecticut, Illinois, Minnesota, New Jersey, New York, Rhode Island and Virginia.
However, many of those states arguably relied at least in part on an interpretive rule issued by the CFPB taking a narrow view of the scope of preemption under the FCRA. Should that interpretive rule be withdrawn by the bureau, those laws may also be challenged on the grounds of federal preemption.
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