Photo: Scripps News
COMMENTARY: When the Court Chose Credit Over Care – What the Reversal of the Medical Debt Rule Means for You
On July 11, 2025, a decision out of a Texas courtroom sent ripples through households across America—especially for those juggling hospital bills, surprise emergency room visits, and mounting credit card statements. U.S. District Judge Sean Jordan struck down a rule that would have made it easier for millions of Americans to escape the heavy burden of medical debt on their credit reports. With a stroke of a gavel, what was set to be a major relief for around 15 million people disappeared.
But what does that really mean for you and me? Why did the Biden administration push for this rule in the first place? And what happens now?
Let’s unpack what just happened—and why it matters more than many realize.
What Was the Rule?
The Biden administration, through the Consumer Financial Protection Bureau (CFPB), introduced a rule in early 2025 that aimed to remove medical debt from credit reports entirely. Their reasoning was simple and arguably fair: most medical debt isn’t about reckless spending—it’s about people getting sick or hurt and then getting stuck with bills they couldn’t predict or avoid.
Imagine this: you slip and break your ankle, or your child needs surgery. You have insurance, but it doesn’t cover everything. Suddenly you’re thousands of dollars in debt. Not because you made bad choices—but because life happened.
Under the proposed rule, medical debts—especially those that had already been paid or were being disputed—would no longer drag down your credit score. For some, this could mean an increase of 20 points or more on their credit reports. That might not sound like much, but in the world of lending, it can be the difference between getting approved for a mortgage or car loan—or not.
So What Changed?
On July 11th, Judge Sean Jordan, appointed by former President Trump, ruled that the CFPB had no authority to make such sweeping changes under current law. Specifically, he argued that the agency overstepped its powers under the Fair Credit Reporting Act, which governs what kind of information can be included in credit reports.
His reasoning was this: unless Congress explicitly gives the CFPB the green light to remove certain types of debt—like medical bills—they can’t just decide to do it on their own.
In plain terms: the judge said the rule wasn’t legal. And just like that, it’s gone.
The Numbers Behind the Pain
To understand why this matters, let’s look at the scope of the problem.
According to the Kaiser Family Foundation, over 100 million Americans carry some form of medical debt. That’s nearly 1 in 3 of us. And for many, it’s not just a bill—they’re facing calls from collection agencies, lowered credit scores, and in some cases, even losing housing or jobs due to poor credit.
Medical debt is not like other debt. No one chooses to get cancer. No one plans for a car crash. These aren’t purchases—they’re emergencies. And yet, our system treats them like unpaid shopping sprees.
That’s what made the CFPB’s rule so groundbreaking: it acknowledged the unfairness of treating unavoidable medical costs the same as a maxed-out credit card from reckless spending.
The Court’s Viewpoint
To be fair, Judge Jordan’s ruling wasn’t about whether medical debt is good or bad. His decision was based on the law—not emotion. He argued that if such a major shift in credit reporting is to happen, it needs to go through Congress, not just a regulatory agency.
Supporters of the ruling say that removing medical debt entirely from credit reports could make it harder for lenders to assess a borrower’s full financial picture. They argue that credit scores should reflect all debts, even medical ones, to help banks make smart lending decisions.
In other words, if someone has a pattern of unpaid bills—even medical ones—lenders want to know.
The Political Divide
This ruling has widened the already sharp divide between political parties.
- Democrats, including President Biden and Vice President Kamala Harris, argued that the rule was about justice. They say no one should have their credit wrecked for needing medical care, and that the court’s decision is another blow to working families.
- Republicans and many financial industry leaders praised the ruling, saying it preserves the integrity of credit reporting and reins in a federal agency from acting without clear limits.
But at the end of the day, this isn’t just a political or legal issue—it’s a deeply personal one. It affects your ability to rent an apartment, buy a home, or even get a job (some employers check credit). And it impacts the lives of everyday people, not just policymakers or Wall Street.
What This Means for You
If you’re one of the 15 million Americans who stood to benefit from the rule, this reversal is likely disappointing—and frustrating.
Here’s what it means in practical terms:
- Your medical debt stays on your credit report, unless it’s already been removed through other processes.
- Your credit score may remain lower than it could have been under the new rule.
- Lenders, landlords, and others can still use medical debt to judge your financial reliability.
- The only way forward now is either a new law from Congress—or more limited regulations that stay within existing legal boundaries.
Is There Any Hope Left?
Yes—but it won’t be easy.
For the CFPB’s vision to become reality, Congress would need to pass a law explicitly giving the agency the power to exclude medical debt from credit reports. Given the current political gridlock, that’s a tall order.
Still, there are smaller wins happening. Credit reporting agencies like Equifax, Experian, and TransUnion have already begun voluntarily reducing the impact of medical debt. For example:
- They’ve removed paid medical debts.
- They’ve extended the time before unpaid medical bills appear on your report (to give insurance companies time to process claims).
- They’ve excluded debts under $500 in some cases.
These are good steps—but they don’t go as far as the CFPB’s now-blocked rule.
What You Can Do Now
If you’re struggling with medical debt and worried about your credit, here are some practical steps:
- Check your credit report. You can get a free copy from AnnualCreditReport.com every year from each of the three major bureaus.
- Dispute errors. If there’s medical debt listed that’s already paid or incorrect, dispute it right away.
- Ask for financial assistance. Many hospitals have charity care programs that can wipe out or reduce bills if you apply.
- Negotiate your bills. Call your healthcare provider. You’d be surprised how often they’re willing to reduce or settle.
- Work with credit counselors. Nonprofits can help you build a plan to repair your credit and manage debt.
The Bigger Conversation
This ruling also forces us to ask deeper questions about our healthcare system:
- Why does a trip to the emergency room sometimes cost more than a month’s rent?
- Why do we tie financial stability to something as unpredictable as illness?
- And why is it legal for someone’s medical history to affect their ability to get a mortgage?
These aren’t easy questions. But they’re the ones we need to be asking.
Conclusion: A Setback, Not the End
The July 2025 ruling is a blow for consumers hoping for relief. But it’s not the final word. The conversation about medical debt—and how it affects credit—is far from over.
This moment should be a wake-up call, not just for lawmakers and agencies, but for all of us. Healthcare shouldn’t be a pathway to poverty. And needing medical care shouldn’t put your financial future at risk.
Whether change comes through legislation, advocacy, or a shift in how we view credit and care—it’s clear something has to give.
Because at the heart of this debate is a simple truth: no one should be punished for getting sick.
Source: ET
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