Consumer Financial Protection Bureau headquarters in Washington, D.C.
The same day the CFPB finalized its new rule banning the inclusion of medical debt in consumers’ credit reports, the Plano, Texas-based Cornerstone Credit Union League and the Consumer Data Industry Association in Washington, D.C. filed a lawsuit in federal court Tuesday challenging the new rule.
According to the CFPB, the final rule would remove approximately $49 billion in medical bills from credit reports for 15 million Americans.
“The CFPB’s action will ban the inclusion of medical bills on credit reports used by lenders and prohibit lenders from using medical information in their lending decisions,” the Bureau said in a statement. “The rule will increase privacy protections and prevent debt collectors from using the credit reporting system to coerce people to pay bills they don’t owe.”
A statement posted by Cornerstone officials Wednesday said the “CFPB finalized a rule to remove medical bills from credit reports, which will negatively impact financial institutions because the rule will block credit unions from obtaining a full picture of consumers’ debt. This significantly increases the odds of loan loss negatively impacting the credit union and its member-owners.”
The 54-page lawsuit stated the Fair Credit Reporting Act clearly allows consumer reporting agencies “to report information about medical debt that has been coded to protect the medical privacy of consumers, and expressly authorizes creditors to consider the coded medical debt information in making credit decisions.”
The lawsuit added, “Now, in the waning days of the Biden Administration, the CFPB upends the carefully balanced framework established by Congress with a Final Rule that plainly exceeds its statutory authority. The Final Rule purports simply to roll back the 2005 regulatory exception permitting the use of non-coded medical information by creditors, but in reality, it goes much further. It bans creditors from seeking to obtain or to use any medical information in making credit determinations — including the coded medical debt information that Congress expressly permitted creditors to use in gauging creditworthiness — subject to a few limited exceptions.”
The groups argued, “If not overturned, the Final Rule’s impact will be significant and immediate. Knowing whether a consumer has debt is an important element of underwriting, and unilaterally eliminating consideration of coded medical debt information erodes the predictive nature, and therefore the value, of consumer reports. This leads to worse credit decisions, which in turn will harm consumers in the form of higher delinquency and default rates and increased costs of credit.”
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Michael Ogden
Editor-in-Chief at CU Times. To connect, email at [email protected]. As Editor-in-Chief of CU Times since 2016, Michael Ogden has led the editorial team in all aspects of content strategy and execution, including the creation of the publication’s exclusive and proprietary research database of the credit union industry’s economic landscape. Under Michael’s leadership, CU Times has successfully shifted to an all-digital editorial product with new focuses on the payments, fraud, lending and regulatory beats. Most recently, he introduced a data-focused editorial product for subscribers that breaks down credit union issues into hard data, allowing for a deeper and more factual narrative for readers. In 2024, he launched the "Shared Accounts With CU Times" podcast, which offers a fresh, inside-the-newsroom perspective through interviews with leaders from the credit union industry and the regulatory world. He dives into pressing credit union issues, while revealing the personalities working behind-the-scenes to push the credit union world forward. His background includes years as a radio and TV anchor/reporter and a public relations and digital/social media manager, where he covered the food and music industries, as well as cooperatives and credit unions. Over the years, he has launched numerous exclusive video and podcast series, including a successful series of interactive backstage interviews with musicians at music festivals, showcasing his social media and live streaming production skills.
