Industry groups file lawsuit against Biden’s ban on medical debt in credit reports | Business and economic news

The consumer watchdog said the new rule would lead to higher credit scores as well as 22,000 lower-cost mortgages annually.

Two groups representing the credit reporting industries and credit unions have filed a lawsuit challenging a new rule adopted by the outgoing US President Joe Biden’s administration that prohibits medical debt from being included in US consumers’ credit reports.

The Consumer Data Industry Association and Cornerstone Credit Union Association filed the lawsuit in federal court in Sherman, Texas, on Tuesday, shortly after the US Consumer Financial Protection Bureau filed the lawsuit. It’s finished Regulations.

The agency said the rule would remove $49 billion in medical debt from the credit reports of about 15 million Americans. It was approved despite congressional Republicans demanding that Biden-era financial regulators stop issuing new rules as President-elect Donald Trump prepares to take office on January 20.

Trade groups say the rule violates the Fair Credit Reporting Act, which explicitly allows consumer reporting agencies to report information about medical debt and allows creditors to examine that information.

“It is such a black law that no agency can prohibit through regulation what Congress expressly permits under law,” the lawsuit said. “Because the final rule conflicts with the statute, it must be repealed.”

The case was referred 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 the loan, and the change should cause credit scores to rise and could result in 22,000 additional low-cost mortgages being issued annually.

The new rule will also prohibit lenders from taking certain medical information into account when making lending decisions and help prevent debt collectors from seeking to force consumers to pay false medical debts they don’t actually owe, the agency said.

Banking industry groups and credit bureaus said the ban could leave them blind to important information about the risks financial institutions face from borrowers and could lead to banks making fewer loans, not more.