Industry groups sue over Biden ban on medical debt in credit reports

A new rule that was passed by US President Joe Biden’s incoming administration that forbids the inclusion of medical debt on American consumers’ credit reports has been challenged by two organizations representing the credit reporting and credit union industries.

The Consumer Data Industry Association and Cornerstone Credit Union League filed the lawsuit on Tuesday in Sherman, Texas, shortly after the US Consumer Financial Protection Bureau finalized the regulation.

According to the organization, the rule would remove approximately 15 million Americans’ medical debts from their credit reports. It was adopted despite demands from Republicans in Congress&nbsp, that Biden’s financial regulators stop issuing new rules as President-elect&nbsp, Donald Trump prepares to take office on January 20.

The Fair Credit Reporting Act, which expressly permits consumer reporting organizations to report information about medical debt, is being violated by the trade groups.

According to the lawsuit, “Black Letter Law” means that an organization cannot impose regulations on items that Congress has expressly permitted by statute. “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.

The CFPB believes that medical debt is weak on the part of the borrower to determine whether they will repay a loan. This change should result in higher credit scores and result in theissuance of an additional 22, 000 low-cost mortgages annually.

According to the new rule, lenders will not be able to take into account certain medical information when making lending decisions, and it will assist debt collectors from trying to coerce consumers into paying medical debts they don’t actually owe, according to the agency.