Medical Debt to Remain on Credit Reports Following Major Court Decision
A sweeping federal court decision out of Texas has derailed a long-anticipated rule that promised to erase unpaid medical debt from Americans’ credit reports. U.S. District Judge Sean Jordan ruled on July 11, 2025, that the Consumer Financial Protection Bureau (CFPB) had overstepped its authority with the regulation—a move that will have significant financial consequences for millions of Americans.
Key Points Summary
- A Texas judge reversed a CFPB rule designed to remove medical debt from credit reports.
- The ruling affects roughly 15 million Americans and about $49 billion in medical debt.
- Credit scores for impacted individuals will not see the expected average 20-point increase.
- The decision benefits the credit industry but raises concerns about fairness and access to credit.
- Many consumer and civil rights groups denounced the ruling as a blow to financial equity.
How the Court Came to Its Decision
In January 2025, the CFPB finalized a rule banning the inclusion of medical debt on credit reports. The policy was scheduled to go into effect at the end of July and had been widely praised by advocates for patients and financial equity. It would have wiped an estimated $49 billion in medical debt from the credit records of approximately 15 million Americans, potentially raising their credit scores by around 20 points and easing their path to loans and other opportunities.
However, Judge Jordan—appointed by former President Donald Trump—ruled that the agency lacked authority under the Fair Credit Reporting Act to enforce such a sweeping change. The judge’s opinion sided with credit industry groups and the Trump administration, who argued that Congress, not a regulatory agency, must authorize such a fundamental shift in credit reporting practices.
What the Reversal Means for Americans
The court’s ruling means that unpaid medical debt will once again appear on credit reports. This information can now be used by lenders to determine eligibility for mortgages, car loans, credit cards, and other financial products. For many, this will continue to be a significant barrier to accessing credit, as medical debt is the most common collection account type in America.
Key impacts include:
Several medical advocacy and consumer protection groups criticized the decision. “Medical debt is not predictive of creditworthiness. This decision will hurt people’s financial futures,” stated Allison Sesso, president and CEO of Undue Medical Debt. The CFPB previously argued that medical debt typically results from unexpected illness rather than poor financial choices, and often contains errors that unfairly reduce credit scores.
Why the Credit Industry Pushed Back
Credit reporting agencies and financial institutions lobbied against the rule, contending that removing medical debt would give lenders an incomplete picture of someone’s financial status. Dan Smith, president and CEO of the Consumer Data Industry Association, called the reversal “the right outcome for protecting the integrity of the system,” claiming medical debt remains a relevant data point in assessing ability to pay.
At the same time, all three major credit bureaus—Experian, Equifax, and TransUnion—have recently excluded medical debts under $500 from individual reports, reflecting some willingness to address the issue outside federal mandates.
States May Chart Their Own Course
With this federal rollback, attention is turning to state-level initiatives. Nine states have laws or pending legislation to ban or limit the reporting of medical debt on credit reports. Colorado and New York, for example, have already enacted strong protections. Advocates are urging more states to take action to blunt the effects of the latest court decision.
What Comes Next?
Some consumer advocates hope Congress will establish a national policy eliminating medical debt from credit considerations. For now, though, millions of Americans must continue navigating a system where unpredictable health costs can hurt financial stability for years to come.
Have you or your loved ones been affected by medical debt on your credit report? Share your story or join the discussion below—your experience could help shed light on the real-world impact of these legal developments.