Consumer Credit Industry can Breathe Easier as CFPB's Medical Debt Rule Likely to be Discharged

The litigation, which has been pending since the beginning of the year filed by Cornerstone Credit Union League (“Cornerstone”) and the Consumer Data Industry Association (“CDIA”) against the Consumer Financial Protection Bureau (“CFPB”) and former Director Rohit Chopra regarding the CFPB’s Rule prohibiting collection and reporting of consumer medical debt information will likely reach its conclusion in the coming weeks.

The Rule is currently stayed through June 15, 2025, as discussed in a prior blog post, found here and here, regarding the Medical Debt Rule. Judge Sean D. Jordan has set a hearing date, June 11, 2025, for the Joint Motion for Consent Judgment filed on behalf of Cornerstone, CDIA, and the CFPB. The National Consumer Law Center, and others, have appeared in this matter as Intervenor Defendants and oppose the Joint Motion.

The enacted rule seeks to preclude Consumer Reporting Agencies (“CRA”) from collecting and reporting consumer data related to medical debts, which certainly could expose the consumer credit industry to litigation and other uncertainties.

The Motion seeks to vacate the Rule through stipulation that the CFPB violated the law in enacting the Rule. Specifically, the Motion asserts that: (1) the CFPB exceeded its authority and violated 15 U.S.C. § 1681b(g)(1), which allows consumer reporting agencies to include coded consumer medical debt information on their consumer report, so long as underlying health conditions are not disclosed; (2) the rule violates 15 U.S.C. § 1681b(g)(2), which allows consideration of medical debt information by creditors so long as it is reported using codes that "do not identify, or provide information sufficient to infer, the specific provider or the nature of such services, products, or devices to a person other than the consumer."; and (3) the rule relies on an erroneous interpretation of 15 U.S.C. § 1681b(a).

The opposition to the Joint Motion contends that the Administrative Procedure Act (“APA”) does not allow the CFPB to repeal rules through consent judgment rather than through the notice and comment requirements of the APA. The Opposition also contends the CFPB has, and had, authority to repeal the portion of section authorizing disclosure of coded medical information. The opposition also challenged the continuation of the preliminary injunction issued at the onset of the case.

Cornerstone and CDIA have replied to the opposition contending that an order entering final judgment in this case is within the court’s discretion or that it can alternatively issue summary judgment to dispose of the case. The Plaintiffs also reiterate their contentions that the medical debt rule contradicts the law and that vacatur is appropriate. The CFPB has not filed a Reply regarding the opposition to the Joint Motion.

Should the court grant the relief requested by the joint motion, as expected, the rule will be vacated. The judicial determination that the CFPB’s process violated the law in multiple ways will also likely limit future administrations from seeking to enact the same or similar rules the next time there is an administration change.