Industry groups sue over Biden ban on medical debt in credit reports | business and economy news
The consumer watchdog said the new rules would boost credit scores and lead to an additional 22,000 low-cost mortgages a year.
Two groups representing the credit reporting and credit union industries have filed a lawsuit challenging a new rule adopted by outgoing US President Joe Biden’s administration that bans the inclusion of medical debt on American consumers’ credit reports.
The Consumer Data Industry Association and the Cornerstone Credit Union League filed the lawsuit Tuesday in federal court in Sherman, Texas, shortly after the U.S. Consumer Financial Protection Bureau finalized the regulation.
The agency said the rule would remove $49 billion of medical debt from the credit reports of about 15 million Americans. It was adopted despite demands from Republicans in Congress that Biden’s financial regulators stop issuing new rules as President-elect Donald Trump prepares to take office on January 20.
Trade groups say the rule violates the Fair Credit Reporting Act, which explicitly allows consumer reporting agencies to report information about medical debt and authorizes creditors to consider that information.
“It is black-letter law that an agency may not preempt through regulations what Congress has expressly permitted by statute,” the lawsuit said. “Because the final rule violates the statute, it should be rescinded.”
The case was assigned to Trump-appointed U.S. District Judge Sean Jordan. The CFPB declined to comment.
According to the CFPB, medical loans give little indication of whether the borrower is likely to repay the loan and the change should result in increased credit scores and an additional 22,000 low-cost mortgages being issued per year.
The new rule also would prevent lenders from considering certain medical information in making lending decisions and help prevent loan sharks from forcing consumers to pay off bad medical debt, the agency said. .
Banking and credit bureau industry groups argued that the restrictions could deprive financial institutions of important information about the risk they face from borrowers and could result in banks making fewer loans, not more.
