Litigation Challenging CFPB's Medical Debt Rule Hits a Speed Bump

The litigation 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 has not concluded as we expected. Plaintiffs and the CFPB filed a joint motion for entry of a consent judgment.

The Eastern District of Texas requested supplemental briefing on the implication of intervening defendants’ refusal to consent to the proposed judgment; the Court also asked the parties to address whether vacatur was the proper remedy.

The Court extended the stay of the Rule through August 11, 2025, as discussed in a prior blog post, found here and here and here, regarding the Medical Debt Rule.

The enacted rule seeks to preclude Consumer Reporting Agencies (“CRA”) from collecting and reporting consumer data related to medical debts.

Intervening Defendants oppose the joint motion on two bases. First, they contend that a consent judgment between two parties is impermissible when it impacts the rights of a third-party to the litigation; i.e. two parties can only resolve the disputes at issue amongst themselves and cannot deny the third party its legal right to have its case resolved through the litigation process. Second, they contend the proposed joint motion is an improper attempt to avoid the public comment period for rulemaking under the Administrative Procedure Act.

Intervening Defendants also contend that Vacatur is an improper remedy because the Rule enacted by Director Chopra’s CFPB had a severability clause for portions of the Rule deemed unlawful. Intervening Defendants contend that any unlawful provisions of the Rule should be stricken from the Rule rather than vacating the entire Rule.

Cornerstone, CDIA, and the CFPB ask the Court to enter the consent judgment or alternatively grant summary judgment to Plaintiffs in the litigation. Their primary position is that intervening defendants do not have a cognizable legal right at issue in the litigation and therefore no rights would be impacted by entry of the consent judgment. They also contend that vacatur is a proper remedy when a court determines a Rule violates the governing statute of an administrative agency.

We expect a ruling from the Eastern District of Texas before the end of the current stay of the Rule.