Court Vacates CFPB Medical Debt Credit Reporting Rule

Case: Cornerstone Credit Union League v. Consumer Financial Protection Bureau
Court: U.S. District Court for the Eastern District of Texas
Citation: No. 4:25-cv-16-SDJ (E.D. Tex. July 11, 2025) (unpublished)
Decided: July 11, 2025
Bottom line: The federal rule that would have kept most medical debt off lender-facing credit reports is gone, so consumers must rely on bureau policies, state law, and FCRA dispute rights.

Background

The FCRA generally bars creditors from obtaining or using medical information in credit decisions, but since the 2003 FACT Act it has allowed consumer reporting agencies to report, and creditors to use, medical debt information that is coded so it does not reveal the provider or the nature of the services. 15 U.S.C. § 1681b(g)(1)–(2). Since 2005, federal regulations also contained a broader “financial information” exception allowing creditors to consider medical debts in some circumstances.

On January 14, 2025, the CFPB published a final rule (90 Fed. Reg. 3276) that would have removed that regulatory exception, generally prohibited creditors from using medical debt information in credit decisions, and generally barred consumer reporting agencies from furnishing medical debt information to creditors who could not lawfully use it. The CFPB’s rulemaking stated that, even after the national bureaus’ voluntary changes, 15 million Americans still had $49 billion in medical bills on their reports. The rule was scheduled to take effect March 17, 2025.

The Cornerstone Credit Union League and the Consumer Data Industry Association sued in the Eastern District of Texas. After a change in CFPB leadership, the court stayed the case and postponed the rule’s effective date. Two individuals with medical debt and two legal aid organizations intervened to defend the rule, anticipating the CFPB would not. The CFPB and the trade groups then jointly asked the court to enter a consent judgment declaring the rule unlawful.

What the court held

On July 11, 2025, Judge Sean D. Jordan granted the joint motion. After a fairness hearing, he found the proposed consent judgment fair, adequate, and reasonable and adopted its proposed holdings as the court’s own. The court held that the rule “exceeds the Bureau’s statutory authority by violating the plain text of 15 U.S.C. § 1681b(a), (g)(1)–(2),” reasoning that the statute expressly permits bureaus to report, and creditors to use, properly coded medical debt information, and that the CFPB’s exception-making authority lets it expand permitted uses, not prohibit uses the statute allows.

The court rejected the intervenors’ arguments that their consent was required, that a rule adopted through notice and comment can be repealed only by another rulemaking, and that the court should remand without vacatur. It vacated the rule in full.

Our take

We think the statutory question was closer than the opinion suggests. The intervenors argued that § 1681b(g)(1)’s coding provision is a condition on otherwise-authorized disclosures, not an affirmative right to report medical debt, and that the CFPB had authority to narrow the regulatory exception it administered. The court rejected that reading. Our larger concern is procedural: when an agency changes its mind about a rule, the usual path is a new rulemaking with public comment. Here, the agency agreed with its challengers, and a consent judgment accomplished the repeal. The court addressed that objection, but the practice raises fair questions about accountability.

As a single district court ruling, the decision does not bind other courts, but vacatur of a rule has nationwide effect. The rule cannot take effect unless the ruling is reversed or a new rule is adopted.

What it means if your report is wrong

Medical debt can still appear on credit reports under federal law, but much of it should not. The three national bureaus have voluntarily stopped reporting paid medical collections and medical collections under $500, and many states restrict medical debt reporting (though the CFPB now argues such state laws are preempted). Check your reports for medical collections that are paid, under $500, less than a year old, covered by insurance, or not yours, and dispute them in writing. Collectors that report medical debts they know are disputed or inaccurate may also face FDCPA liability.

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Sources

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Updated November 1, 2026. "Our take" is the firm's opinion. This page is general information, not legal advice, and later decisions may change the law.