On February 13, the U.S. District Court for the Southern District of Texas stayed a lawsuit against the CFPB regarding the CFPB’s medical debt reporting final rule.
The final rule, which the CFPB finalized in early January, would prohibit creditors from considering medical debt information when determining credit eligibility. On January 8, trade associations representing the debt collection industry sued the CFPB, challenging the constitutionality of the rule, among other claims. The plaintiffs alleged the rule hides from creditors “over $49 billion” in funds that are owed to healthcare providers, including doctors, nursing homes, and hospitals. The plaintiffs claim that timely payment of medical bills allows healthcare providers to stay in business and provide essential healthcare services to Americans. The plaintiffs also asserted the CFPB’s final rule would hurt consumers because erasing medical debt information from credit reports “will make credit reports less useful and reliable and could lead to flawed underwriting, similar to that which caused the 2007 Financial Crisis.”
On February 12, Plaintiffs filed a motion to stay proceedings to allow the CFPB’s new leadership time to review and consider its position on the medical debt rule. A day later, the court granted the plaintiffs’ motion and stayed the case for 90 days.
The district court’s order followed a similar order issued by a district court in the Eastern District of Texas, which also stayed a case recently challenging the CFPB’s medical debt rule (as covered by InfoBytes here).
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