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Federal Judge Reverses Biden-Era Medical Debt Rule: 15 Million Americans Face Credit Score Setback in 2025
Washington, D.C., July 15, 2025 – In a stunning reversal, U.S. District Judge Sean Jordan in Texas has struck down a Biden administration rule that aimed to erase $49 billion in medical debt from the credit reports of nearly 15 million Americans. The decision, handed down on July 11, 2025, just days before President Donald Trump’s latest policy moves, has sparked heated debate over consumer protections, financial fairness, and the authority of federal agencies. The ruling, which halts a policy that could have boosted credit scores by an average of 20 points and unlocked 22,000 additional mortgages annually, is a significant setback for millions grappling with medical debt. NRIGlobe dives into the details of this controversial decision and its far-reaching implications.
The Biden-Era Rule: A Lifeline for Millions
Finalized by the Consumer Financial Protection Bureau (CFPB) in January 2025, just before President Joe Biden’s departure from office, the rule sought to transform how medical debt impacts credit scores. Unlike typical debts, such as credit card balances or auto loans, medical debt often arises from unexpected emergencies or chronic health conditions, unfairly penalizing consumers. The policy prohibited credit reporting agencies like Experian, Equifax, and TransUnion from including medical debt in credit score calculations, aiming to remove an estimated $49 billion in debt from the reports of 15 million Americans. The CFPB projected that this change would not only improve credit scores but also enhance access to mortgages, car loans, and other financial opportunities, particularly for low-income households and those with chronic illnesses.
Former Vice President Kamala Harris championed the rule during her 2024 presidential campaign, emphasizing its role in reducing financial burdens. “No one should be denied economic opportunity because they got sick or experienced a medical emergency,” Harris stated, highlighting efforts to crack down on predatory debt-collection tactics and expand debt forgiveness pathways. The American Medical Association also supported the rule, arguing that medical debt is a poor predictor of creditworthiness, as it often stems from one-time hospital stays or accidents rather than financial mismanagement.
Judge Jordan’s Ruling: A Legal Roadblock
U.S. District Judge Sean Jordan, a 2019 Trump appointee, ruled that the CFPB exceeded its authority under the Fair Credit Reporting Act (FCRA), amended in 2003, by mandating the removal of medical debt from credit reports. In his July 11 decision, Jordan argued that the FCRA does not grant the CFPB the power to alter how specific types of debt are reported, effectively voiding the rule before it could take effect at the end of July. He noted, however, that the CFPB could “encourage” creditors to use alternative data for creditworthiness assessments, though this suggestion lacks legal enforceability.
The ruling aligns with broader efforts by the Trump administration to curb federal agency overreach. The CFPB, now under new leadership, reversed its defense of the rule and joined credit industry groups, including the Consumer Data Industry Association, in challenging it. Dan Smith, head of the association, praised the decision, stating, “This is the right outcome for protecting the integrity of the credit reporting system.” Critics, however, argue that the ruling prioritizes industry interests over consumer welfare, leaving millions vulnerable to the financial fallout of medical emergencies.
The Human Impact: Stories Behind the Numbers
For many Americans, medical debt is a crushing burden. Approximately 1 in 12 U.S. adults owe at least $250 in unpaid medical bills, according to the Peterson Center on Healthcare and KFF. These debts, often accrued through no fault of their own, can devastate credit scores, limiting access to housing, employment, and loans. One Reddit user shared a harrowing story: “We have over $400,000 in unpaid hospital bills between me and my son. Our medications cost $3,000+ a month out of pocket… We lost our savings, our home.” Such accounts highlight the real-world stakes of the ruling, which could exacerbate financial hardship for millions.
The Biden rule was seen as a lifeline, particularly for those with chronic conditions or those caught in disputes with insurance companies. For example, a North Carolina plan, approved under the Biden administration, incentivized hospitals to forgive $2 million in medical debt for residents, demonstrating the potential for innovative solutions. The reversal of the federal rule now shifts the burden back to individuals, who must navigate complex debt management options like negotiating with providers or seeking nonprofit credit counseling.
Political and Social Backlash
The decision has ignited fierce reactions across the political spectrum. On X, users expressed frustration, with @fontainetricia1 calling it a “spiteful” move by Republicans to “fuck people over any chance they get,” while @gfmdoughbot likened medical bills to “surprise party invites nobody asked for.” Others, like @AppaloosaKid, urged voters to “#VoteBlue2026” in response to policies perceived as favoring the wealthy. Conversely, some argue that including medical debt in credit reports ensures transparency, with one user noting, “Being able to hide debt from that thing that lets people know how likely you are to repay your debts is silly.”
The ruling comes on the heels of President Trump’s signing of a massive spending and tax bill that includes sweeping Medicaid cuts and new work requirements, potentially stripping coverage from millions. This broader policy shift amplifies concerns about rising medical debt, as reduced healthcare access could lead to more unpaid bills. Consumer advocates warn that the decision may widen inequality, particularly for financially vulnerable households already struggling with high U.S. healthcare costs.
What’s Next?
With no indication of an appeal from the Trump-led CFPB, the future of medical debt relief lies in uncertain territory. Legal experts suggest the CFPB could explore narrower regulations, such as redefining how medical debt is categorized, but these efforts face resistance from a conservative judiciary and a politically divided Congress. Some states have already banned medical debt from credit reports, and this ruling may spur further state-level action, though federal preemption laws could limit their impact.
For affected Americans, experts recommend monitoring credit reports for accuracy, negotiating payment plans with healthcare providers, and exploring nonprofit credit counseling services. Consumer advocates are also pushing for legislative fixes, but bipartisan support in Congress remains elusive amid ongoing partisan battles.
Why This Matters
The reversal of the medical debt rule underscores the precarious intersection of healthcare and financial stability in America. With medical debt affecting millions, the decision could hinder economic mobility, particularly for those already burdened by systemic inequities. As one X user poignantly stated, “There’s no payment plan for ‘disabled and can’t physically work’… You can’t ‘just pay’ $100,000+ bills.” The ruling not only reverses a key consumer protection but also reignites debates over the role of federal agencies in addressing systemic issues like medical debt.
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