On July 11, the U.S. District Court for the Northern District of Texas vacated the CFPB’s medical debt rule on the grounds that it exceeded the Bureau’s statutory authority and violated both the FCRA and the APA, granting the parties’ joint motion for consent judgment. The court reasoned that the FCRA permits credit reporting agencies (CRAs) to report information about consumers’ medical debt if it has been coded to protect their privacy; accordingly, the FCRA authorizes creditors to consider coded medical-debt information when making credit determinations. The court emphasized that the Bureau “may permit creditors to obtain or use medical information to determine creditworthiness in more circumstances than the statute otherwise allows, but it may not prohibit uses of coded medical information that the statute authorizes.”
As previously covered by InfoBytes, the Bureau issued a final rule prohibiting credit reporting companies from including medical bills on credit reports sent to lenders and prohibiting lenders from considering medical information, regardless of coding. Two trade associations immediately challenged the rule as plaintiffs.
In its decision, the court concluded the medical debt rule exceeded the CFPB’s authority by “fashioning a new regulatory scheme,” and held the Bureau cannot “restrict the use of permissible information allowed by statute,” such as properly coded medical debt. By vacating the rule, the court reaffirmed that CRAs may continue to report consumers’ coded medical-debt information as permitted under the FCRA.
Relatedly, on July 14, the U.S. District Court for the District of Columbia received a status report indicating that the CFPB revoked its medical debt advisory opinion, which was a previous piece of guidance challenged by plaintiffs in two related cases, and stated the Bureau does not intend to reissue it (the revocation of advisory opinion covered here). With the advisory opinion withdrawn and no plans for reissuance, the plaintiffs advised they would voluntarily dismiss their claims without prejudice.
On July 14, 30 Democratic senators sent a letter to the CFPB requesting the information which the Bureau had relied upon when it requested the district court to vacate the medical debt rule. The senators noted that consumers frequently receive collection notices for debts they do not owe or that should have been covered by insurance, resulting in lasting credit score damage despite data showing that medical debt is not a good indicator of creditworthiness. The letter expressed concern about the disproportionate impact of medical debt on seniors, veterans, new parents, people with disabilities, cancer patients, and small business owners. The senators called on the CFPB to make public all such information, including communications with the debt collection industry, by July 28.
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