Americans Must Pay $50 Billion in Medical Debts Previously Taken off Their Credit Reports Under Biden’s Administration

Just when consumers thought they could save money without having to pay off medical debts and have those same debts removed from their credit reports as a bonus under Biden’s rule – a Texas federal judge on July 11th dashed many hopes for those looking forward to bypass paying off the debts when the Judge overturned a Biden-era regulation that allowed the removal of medical debts off Americans’ credit reports.

The rule by the previous administration goes beyond the Consumer Financial Protection Bureau’s (CFPB) jurisdiction, according to Judge Sean Jordan for the Texas Eastern District. President Trump appointed Jordan to the bench in 2019. As Biden prepared to leave the White House and turn the presidential reins over to Trump the independent CFPB finalized the regulation in January.

According to the Biden administration, the operation would have cleared approximately 15 million Americans’ credit reports of medical debt totaling close to $50 billion. Jordan opined in his ruling that the CFPB is not authorized to delete medical debt from credit reports under the 2003 amendment to the Fair Credit Reporting Act.

With Biden’s approval for the CFPB to wipe off medical debts from millions of credit reports this meant no negative impact would remain on the credit history of Americans, thus the elimination of the debts would only serve to increase consumers’ credit scores.

A well-known credit specialist weighed in on the court decision.“The real issue with medical debt is the argument that people shouldn’t face credit related difficulties because of their medical debts,” said credit expert John Ulzheimer by email to Houston News Today. John is the President of The Ulzheimer Group and founder of CreditExpertWitness.com. He is a former employee for FICO, Equifax and Credit.com. He is the only recognized credit expert who actually comes from the credit industry.

“I’m sympathetic to that argument but it doesn’t change the fact that debt is debt, regardless of the type of debt. And, medical debt does not appear on credit reports until it is well into the default stage, meaning escalated efforts to collect the debt have already begun. Your current and future lenders deserve to be able to see this as part of their risk assessment processes, which is why I never agreed to the large-scale attempt to remove medical debts from credit reports.”

Yet many proponents insist that medical debts listed on credit reports are not always a reliable indicator of a person’s ability to repay loans. Furthermore, errors on medical invoices are common and can result in protracted disputes between patients, insurance companies, and providers.

Author Sara R. Collins writes on the Commonwealth Fund website, “This new rule isn’t the first of its kind. Several states have also taken action to remove medical bills from credit reports, with at least six states fully prohibiting the practice. In 2023, the nation’s three largest credit rating agencies – Equifax, Experian, and TransUnion – removed medical bills of $500 or less from consumer credit reports along with records of medical bills that had been repaid.”

Medical Debts

Sara Collins further writes, “A 2024 Commonwealth Fund survey found that 35 percent of those who were uninsured for all or part of the year reported having medical debt. But being insured doesn’t fully guard against medical bills either. High deductibles and cost sharing in private plans leave 23 percent of working-age adults underinsured, according to the same survey. They are also vulnerable to accumulating debt: 44 percent of those who were underinsured said they were dealing with medical debt.”

A recent analysis by the Consumer Financial Protection Bureau found that those with medical debt on their credit reports are disproportionately people with low incomes and people who live in the South. People living in regions that are majority Black or Hispanic are also disproportionately represented among those with medical debt.

CFPB Targeted By Trump

As stated earlier, Judge Jordan reiterated that the CFPB is not authorized to delete medical debt from reports under the Fair Credit Reporting Act. The bureau may, however, “permit” or encourage creditors to use other types of information, according to the application.

Since taking over the White House again, Trump has worked tirelessly to rid the federal government of what his Department of Government Efficiency panel refers to as “waste, fraud, and abuse.” Early on, the troubled consumer protection organization was targeted by the president and faced widespread layoffs.

Former Vice President Kamala Harris was also a supporter of erasing medical debt when she was in office and it became part of her messaging during the 2024 presidential campaign. During Harris’ proposed economic agenda, she promised to take Biden’s health care accomplishments even further – including by fully erasing the debt, according to news media outlets.

“No one should be denied economic opportunity because they got sick or experienced a medical emergency,” Harris said in January, adding later, “We also reduced the burden of medical debt by increasing pathways to forgiveness and cracking down on predatory debt-collection tactics.”

Dan Smith, head of the Consumer Data Industry Association, welcomed the decision, saying canceling the rule was a move in the right direction.

“This is the right outcome for protecting the integrity of the system,” Smith wrote in a statement, reported by Reuters.

Judge Jordan’s decision comes almost a week after Trump signed a massive spending and tax bill that includes sweeping cuts to Medicaid. New work requirements included in the law could strip millions of their coverage.