
Opposition to Banning Medical Debt Files Lawsuits
COLUMBIA, S.C. — Opposition is mounting against a newly finalized Biden administration rule that aims to ban medical debt from appearing on consumer credit reports. The rule, introduced by the Consumer Financial Protection Bureau (CFPB), faces legal and political challenges that could undermine its implementation.
Two industry groups, the Consumer Data Industry Association (CDIA) and ACA International, filed lawsuits last week seeking to block the rule. Additionally, a leading House Republican lawmaker has vowed to take action against the regulation.
The CFPB rule, finalized last week, prohibits the inclusion of medical debt on credit reports and prevents lenders from considering certain medical information in loan decisions. The measure is expected to remove an estimated $49 billion in medical bills from the credit reports of approximately 15 million consumers, potentially boosting credit scores and improving access to mortgages and other forms of credit.
Scheduled to take effect 60 days after publication in the Federal Register, the rule faces legal opposition from CDIA, which represents major credit bureaus such as TransUnion, Experian, and Equifax, and ACA International, which represents debt collectors. Both groups argue that the rule exceeds the CFPB’s authority under the Fair Credit Reporting Act.
“Americans are frustrated by medical bills. But frustration does not justify lawlessness,” ACA International stated in its complaint filed in the U.S. District Court for the Southern District of Texas. “Here, a federal agency with no healthcare experience is exploiting this frustration by making a politically motivated regulation that prevents credit reporting agencies from showing accurate medical debts on credit reports. No agency has the power to do that.”
The CDIA expressed similar concerns, arguing that excluding medical debt from credit reports will undermine the value of credit data. “This leads to worse credit decisions, which in turn will harm consumers in the form of higher delinquency and default rates and increased costs of credit,” the CDIA complaint noted.
In addition to the lawsuits, GOP Rep. French Hill, chair of the House Financial Services Committee, criticized CFPB Director Rohit Chopra for overstepping regulatory boundaries. Hill indicated that Congress might review and potentially rescind the rule. “Instead of focusing on enhancing economic opportunity for all consumers, Chopra’s regulatory overreach will drive up costs for any American seeking medical care and have a devastating impact on consumers’ access to healthcare, particularly in rural areas,” Hill said in a statement. Interesting enough, Rep. Hill is from Arkansas, and Arkansas faces significant challenges with medical debt, impacting a substantial portion of its residents. Approximately 37% of Arkansans carry some form of debt, surpassing the national average of 29%. Medical debt is the most prevalent type of debt in the state, with Arkansas ranking second nationally for non-elderly adults struggling with this issue. Does Rep. French Hill know that his own constituents have this much medical debt?
Despite the opposition, consumer advocacy groups have lauded the rule as a critical step toward reducing the financial burden of medical debt. “This rule will provide relief to millions of people who have unfairly had their credit impacted simply because they got sick,” said Mona Shah, senior director of policy at Community Catalyst.
What Could be Driving the Opposition to Try and Stop the Removal of Medical Debt?
If the CFPB removes medical debt from credit reports, it would significantly disrupt revenue streams for credit bureaus by reducing demand for credit reports, risk models, and debt collection services, while also lowering consumer interest in credit monitoring subscriptions. The absence of medical debt data would likely increase credit scores for millions, leading to more loan approvals but potentially higher default rates as lenders lose a key indicator of financial distress. Debt collectors would lose leverage in collecting medical bills, further diminishing their reliance on credit bureaus. This regulatory change could also damage the industry’s reputation while prompting costly legal battles and political pushback. To adapt, credit bureaus may need to diversify by offering alternative data products and focusing on identity verification and fraud detection services. Ultimately, the rule could force a long-term shift in how creditworthiness is assessed and how credit bureaus operate.
Medical Debt in South Carolina
South Carolina residents are poised to benefit significantly from the new rule. With 22% of the state’s population having medical debt in collections—the second-highest rate in the nation after West Virginia—the financial relief could be substantial. The median medical debt in collections in South Carolina is approximately $787, while the average per person is around $3,335, ranking the state third nationally.
“A cancer diagnosis can be devastating, not just physically and emotionally, but financially as well,” said James Seidel, founder of CC News Network. “My cancer treatment costs exceeded a million dollars, so I understand firsthand the financial strain that medical debt can impose on families.”

Potential Impact on Credit Scores
The CFPB estimates that the rule could increase credit scores by an average of 20 points for affected consumers, potentially enabling an additional 22,000 mortgage approvals annually. “This will be life-changing for millions of families, making it easier for them to be approved for a car loan, a home loan, or a small-business loan,” said Vice President Kamala Harris.
The rule also bars lenders from using medical devices, such as wheelchairs and prosthetic limbs, as collateral and prohibits repossession if patients are unable to repay loans.
This fight isn’t over, it’s only beginning. Stay tuned to the CC News Network for updates on this important issue.