Medical Debt Stays on Credit Reports: Federal Judge Blocks Biden-Era Rule

A Trump-appointed federal judge in Texas has overturned a rule proposed by the Consumer Financial Protection Bureau (CFPB) that would have banned the inclusion of medical debt on consumer credit reports. The rule, introduced under Biden and backed by his administration, aimed to protect millions of Americans from the long-term financial fallout of medical emergencies. 

In a July 11 ruling, Judge Sean D. Jordan of the Eastern District of Texas sided with business groups who argued that the bureau exceeded its authority. 

“The Bureau has no such power to define what in a consumer report is ‘permissible,’” Judge Jordan wrote in his memorandum.

Medical debt remains the largest source of debt collections on consumer credit reports, accounting for 58% of all third-party collection tradelines, according to a 2022 report from the CFPB. The report estimates that about $88 billion in medical debt was reported on credit records at that time. 

While medical debt can lower credit scores and restrict access to credit, housing, and employment, research shows it is less predictive of future payment problems than other types of debt. The burden of medical debt disproportionately affects people of color, young adults, low-income households, older adults, veterans, and disabled populations.

According to a 2023 report from the CDC’s National Center for Health Statistics (NCHS), 21.2% of adults with disabilities experienced problems paying medical bills in the past year, compared to 9.6% of adults without disabilities.

Dom Kelly, founder, president and CEO of New Disabled South, which is a disability rights organization working in the South, said the ruling was troubling but predictable given the direction of the current administration.

“To be honest, I was disappointed and also not surprised. Given all of the unfortunate court rulings we've seen, both from federal judges and also from the Supreme Court, it was just sort of par for the course, unfortunately, with this administration,” said Kelly. “This Biden rule would have given a lot of relief for people, especially marginalized folks who have a harder time buying a house or getting access to credit for things that could improve their lives, and the amount of medical debt that our people have is obscene.”

Medical debt burdens many disabled individuals who rely on ongoing medical care and often face higher healthcare costs. Even with insurance, expenses like co-pays, therapies, specialized equipment, and more can accumulate, leading to significant financial strain. This debt can worsen existing barriers, including difficulties with steady employment and managing chronic health conditions in general. 

“In our base-building and organizing, when we talk to disabled folks, one of the things that we hear the most is that it’s not only difficult to get access to things like transportation or accessible housing… the thousands of dollars of medical debt keeps them struggling, and keeps it even more difficult to put a roof over their heads and provide for their families,” said Kelly.

For disabled people, medical debt is more than unpaid bills. It can limit access to necessary care and basic needs like housing. Advocates say this debt often feels like an extra layer of hardship that threatens their ability to live with dignity and stability. These realities highlight why stronger protections against medical debt reporting are especially important for disabled communities.

The most at-risk are multiply-marginalized people with disabilities, particularly disabled people of color. Individuals in rural areas are also expected to face more severe barriers to accessing healthcare and recovering from medical debt.

“BIPOC disabled folks are most impacted because, already, Black folks in particular have to face the realities of discrimination at banks and the impacts of long histories of redlining. It is an unfortunate reality of being a person of color in this country,” said Kelly. “Especially if you live in an area where you're more rural or you have less access to healthcare, you're more likely to have medical debt. And if you're a person of color, that just increases the likelihood that it'll be harder to get access to credit to buy a home or the things that you need to help you get out of poverty.”

Although the major credit bureaus had voluntarily limited reporting of smaller medical debts in 2023, the rule proposed by the CFPB aimed to create a consistent national standard to protect people from the long-term effects of medical debt on their credit histories. With the judge’s decision to block the rule, these protections are now uncertain. Without a clear federal requirement, medical debt will likely continue to appear on credit reports, affecting the financial stability of millions.

In a statement given to The Invisible Voice, Little Lobbyists, an organization that advocates for medically complex children and families, said the following:

“Families of medically complex children repeatedly state that they would be bankrupt without Medicaid, with many reporting five to six-figure annual costs of hospitalizations, medical supplies, medications, and therapies. Some are already struggling with medical debt that has affected their ability to access credit, including for car, home, and personal loans. This has driven them to ask for loans from friends and family members, run crowdfunding fundraisers, and work multiple jobs to provide for their families. Removing medical debt from their credit histories would have been transformative, allowing them to focus on spending time with their loved ones, not lurching from financial crisis to financial crisis.”

Families of medically complex individuals, like those represented by Little Lobbyists, experience significant financial strain due to the continuous and high costs associated with their children’s medical care. Even with insurance, the cumulative expenses for treatments and necessary supplies often result in substantial debt that jeopardizes their financial stability and access to essential resources.

This ruling reflects a larger political and legal trend aimed at reducing the power of federal agencies tasked with consumer protections. Judge Jordan, appointed by Trump, ruled in a case supported by industry groups like the U.S. Chamber of Commerce, which have historically opposed such protections. This decision is part of a broader wave of regulatory rollbacks and political efforts to weaken the CFPB and undo post-2008 financial reforms.

Experts warn these shifts often overlook the disproportionate impact on disabled and marginalized communities, deepening inequalities and worsening hardships for many vulnerable people.

“I think that it signals a fundamental misunderstanding of disability,” said Kelly. “Every issue is a disability issue because disabled people are impacted by everything. They live at the intersection of every other identity… I think our courts and our electeds probably would not see this as a disability issue because there's just no understanding.”

With the ruling in place, credit bureaus are not legally required to remove or limit medical debt from credit reports. Some advocacy organizations, including consumer and disability rights groups, are urging Congress to act, but the current political dynamics make passage of new protections unlikely.

The battle over medical debt is more than a technical debate about credit scores. It’s a fight for economic dignity and equal access to opportunity because when it’s included on credit reports, it can limit access to housing, employment, and essential care, particularly for disabled and otherwise marginalized Americans. 

For many disabled and low-income people, these decisions result in ongoing hardship. At the same time, they also serve as a call to action. Many activists urge the general public to invest their energies in helping their neighbors at the ground level, especially those who are marginalized.

“These systems aren't going to help us, but we can help each other,” said Kelly. “As working class people, as disabled people, we have to build something new, and we can do that right now. We can build care webs, we can take care of each other, we can help meet each other's needs, because these systems are designed to harm us, but we are not powerless. Care and mutual aid are how we survive.”

As long as medical expenses remain reportable without limits, many will carry the costs of illness long after they’ve left the hospital. For disabled and chronically ill people, that burden doesn’t fade; it grows exponentially.

“This is what happens when we legislate cruelty,” said Kelly. “The systems are designed this way… These are choices made by wealthy, elite people who are in the pockets of corporations, and they are choosing to keep us working-class people poor and struggling.”

More than policy failures, these decisions entrench poverty and strip people of autonomy. As long as courts and lawmakers treat financial protections as optional, the most marginalized will continue to bear the costs.