Consumer watchdog said new rule would lead to rising credit scores and an additional 22,000 low-cost mortgages annually.Two groups representing the credit reporting and credit union industries have filed a lawsuit challenging a new rule adopted by US President Joe Biden’s outgoing administration banning the inclusion of medical debt in American consumers’ credit reports.
The Consumer Data Industry Association and Cornerstone Credit Union League filed the lawsuit in federal court in Sherman, Texas, on Tuesday, shortly after the US Consumer Financial Protection Bureau finalised the regulation.
The agency had said the rule would remove $49bn in medical debts from the credit reports of about 15 million Americans. It was adopted despite demands from Republicans in Congress that Biden’s financial regulators stop issuing new rules as President-elect Donald Trump prepares to take office on January 20.
The trade groups say the rule violates the Fair Credit Reporting Act, which expressly permits consumer reporting agencies to report information about medical debt and authorises creditors to consider that information. Advertisement
“It is black letter law that an agency cannot prohibit through regulations what Congress has expressly permitted by statute,” the lawsuit said. “Because the final rule contravenes the statute, it should be vacated.”
The case was assigned to US District Judge Sean Jordan, a Trump appointee. The CFPB declined to comment.
According to the CFPB, medical debt provides little indication of whether a borrower is likely to repay a loan and the change should result in rising credit scores and could lead …
