Court Blocks Ban on Medical Debt in Credit Reports: What It Means for Consumers in 2025

A sweeping new federal rule was introduced in early 2025 to remove medical debt from credit reports, aiming to boost millions of Americans’ credit scores and reduce the negative influence of medical bills on borrowing. However, in July 2025, a court ruled against this regulation, meaning medical debt can once again be included on credit reports.

What Was the New Rule?

• The Consumer Financial Protection Bureau (CFPB) finalized a rule in January 2025 to entirely ban the inclusion of medical debts on credit reports and prohibit lenders from using medical information in credit decisions.

• The CFPB found that medical debt is often not a fair indicator of creditworthiness—debts frequently arise from emergencies or billing errors and do not accurately predict whether a person will repay a loan.

Key Features of the Proposed Rule:

• Unpaid medical debt (around $49 billion for 15 million Americans) would no longer impact credit scores.

• The average person affected would see a credit score increase of about 20 points.

• The CFPB expected this change could result in 22,000 more mortgage approvals each year.

• Lenders would be barred from considering medical debt or even most forms of medical information, except in very limited and specific circumstances (for example, verifying income paid as Social Security disability or similar).

What Caused the Reversal?

• In July 2025, a federal judge vacated (overturned) the CFPB rule, siding with industry groups who challenged the bureau’s authority to make this sweeping change.

• As of the ruling, medical debt can remain on credit reports, as long as it is properly coded to conceal sensitive details.

• The court decision means the temporary protections the rule would have provided are not currently in effect.

The Current State of Medical Debt on Credit Reports

• Credit bureaus (Equifax, Experian, TransUnion) had previously limited the reporting of medical debt by removing:

  • Paid medical debts

  • Unpaid medical debts less than a year old

  • Medical debts under $500

• With the court overturning the CFPB’s rule, any other medical debt may be reported and used for credit evaluations.

What Does This Mean for Consumers?

• Medical debt can continue to negatively affect credit scores and—by extension—mortgage, auto, and other lending approvals.

• Consumers should still dispute any inaccurate medical debts and watch for changes as appeals or new policies may be introduced in the future.

Key Takeaways

• There was briefly a historic rule to erase all medical debt from credit reports.

• The rule was intended to make lending fairer for those with unavoidable or erroneous medical bills.

• A court has now blocked this rule, meaning medical debt can again be reported and considered by lenders as before.

Consumers must remain vigilant, as the legal and regulatory landscape around medical debt and credit reporting remains in flux. Always check for the latest updates and review your credit report for errors or unfair reporting.

The CFPB Continues to Propose a Rule to Ban Medical Debt

The Consumer Financial Protection Bureau (CFPB) has proposed a rule to ban medical debt from credit reports. This has led to frustration among collectors and financial services firms. The proposal aims to help families recover from medical crises, prevent debt collectors from coercing people into paying bills they may not owe, and ensure that creditors do not rely on data that is often inaccurate. The CFPB's research shows that medical debt has little predictive value in credit decisions, and the data inaccuracies in medical debt reporting can erode the utility of the credit reporting ecosystem. Some collectors have already been moving away from reporting medical debt to credit agencies due to concerns about data integrity and their ability to comply with the Fair Credit Reporting Act

Consequences

The potential consequences of the CFPB's plan to ban medical debt from credit reports are a subject of debate. Collectors and financial firms claim that the proposal would restrict lending, raise borrowing costs, and result in more denials of credit to consumers. They argue that hiding medical debt from credit bureaus would further reduce credit scores' utility as a proxy for a borrower's ability to repay, which they believe doesn't benefit anyone.

The potential consequences for consumers are still uncertain and will likely depend on the outcome of the CFPB's proposal and any subsequent changes to the credit reporting system.

Arguments

The arguments against the CFPB's plan to ban medical debt from credit reports are primarily related to the CFPB's funding structure and the potential impact on the credit reporting system. The CFPB's funding mechanism, which allows it to request funding from the Federal Reserve instead of Congress, has been the subject of a legal challenge. Critics argue that this funding structure insulates the CFPB from congressional oversight and that the agency's actions, including the proposed rule on medical debt, could be called into question if the funding mechanism is found to be unconstitutional.

Efforts

CFPB research found that 58 percent of all third-party debt collection tradelines were for medical debt, making medical debt the most common debt collection tradeline on credit records in 2021. Last March, the big three credit reporting conglomerates, Equifax, TransUnion, and Experian, announced that they would stop reporting some, but not all, medical bills on an individual’s credit report. Large credit scoring companies are moving to models that completely or partially exclude medical bills, though many creditors still rely on older models that haven’t made that shift. VantageScore, an entity owned by the conglomerates, has stopped using medical debt in its scores entirely.

Last April, Vice President Harris launched an all-of-government effort to address the burden of medical debt, and to increase consumer protections around billing and collections. At the time, the Consumer Financial Protection Bureau issued a bulletin to prevent unlawful medical debt collection and reporting in light of the No Surprises Act. The CFPB has taken many steps to ensure that patients are not being unfairly treated, particularly when it comes to coercive credit reporting and collection tactics.

Rohit Chopra, director of the Consumer Financial Protection Bureau, continues to defend the agency's proposal to prevent credit bureaus from considering medical debt in consumer credit scores

Changes in Medical Debt Reporting

The nation’s largest credit reporting agencies; Equifax, Experian, and TransUnion announced on Friday that many U.S. consumers will have their medical debt wiped from their credit reports. 

In a joint statement, they stated that nearly 70% of medical collection debt accounts from consumer credit reports would be removed after conducting months of market research. The changes will take effect July 1, 2022.

Paid medical debt will no longer be included on consumer credit reports. Credit bureaus plan to extend the timeline reporting how long a medical bill is sent to collections. Typically a medical bill is sent to collections after 180 days. Consumers will now be given up to one full year. This will give consumers more time to work with insurance and/or medical providers to address their debt before it is reported to their file without it impacting their credit score.

 Most medical debts in collection on consumer credit reports are under $500. Beginning in the first half of 2023 Experian, Equifax, and TransUnion will no longer include unpaid medical collection debt that is under $500, though that threshold may increase. 

This does not change the responsibility of the consumer to pay, but it may alleviate some of struggle consumers face when trying to apply for credit.