In early 2025, the Consumer Financial Protection Bureau (CFPB) finalized a rule that could have changed credit reports for millions of Americans. The rule aimed to ban the inclusion of medical debt in credit reports used by lenders—a move projected to boost credit scores by 20 points or more for roughly 15 million people.
However, in July 2025, a federal judge in Texas struck the rule down. That decision blocked what many saw as a long-overdue relief effort, arguing that the CFPB overstepped its authority under the Fair Credit Reporting Act (FCRA).
So what does this mean for you, your credit, and the medical bills you might be managing? This guide breaks down everything you need to know about the ruling, its impact, and what actions you can still take to protect your financial health.
II. What the CFPB Rule Was Supposed to Change
The CFPB’s rule was designed to eliminate a major pain point in credit reporting: medical debt. The rule, finalized in early 2025, sought to ban medical bills from appearing on credit reports altogether. According to CFPB research:
- 15 million Americans carried medical debt that appeared in their credit reports.
- Over $49 billion in outstanding medical collections were weighing down credit scores.
- Removing this data could improve scores by an average of 20 points, with an estimated 22,000 more mortgage approvals annually.
The rationale behind the rule was clear:
- Medical debt is involuntary: Unlike credit card purchases or auto loans, you don’t choose to get sick.
- It’s often inaccurate: Billing errors, insurance disputes, and unclear documentation are common.
- It’s a poor predictor of credit risk: People with medical collections often repay loans on time despite their medical debt.
The CFPB’s goal was to ensure that a person’s access to credit wasn’t penalized by an industry rife with error-prone billing systems.
III. What the Court Said: Why the Rule Was Struck Down
On July 11, 2025, a federal district judge blocked the CFPB’s rule from taking effect. The judge sided with plaintiffs—primarily financial trade associations—who argued that the bureau exceeded its authority under the Fair Credit Reporting Act.
The court ruling did not deny the burdens of medical debt but found that the CFPB cannot unilaterally redefine what lenders can or cannot see in credit reports without congressional authorization.
As a result, medical debts over $500 may continue to appear on your credit report. This includes:
- Paid and unpaid medical collections
- Bills sent to collections due to delayed insurance processing
- Debts from hospital stays, emergency services, or ongoing treatments
It’s a significant reversal of expected policy, and it leaves millions of Americans with medical debt vulnerable to credit score damage.
IV. What Protections Still Exist in 2025
Although the federal rule was blocked, some protections remain in place thanks to past credit bureau policy changes and emerging state laws.
A. Credit Bureau Policies
In 2023, Equifax, Experian, and TransUnion—the three major credit reporting agencies—implemented the following policies:
- Medical collections under $500 are no longer reported.
- Paid medical collections of any amount are no longer reported.
- Consumers get a one-year waiting period before unpaid medical collections can appear on their reports.
These changes are still in effect and are the result of pressure from regulators and consumer advocacy groups—not laws. As such, they could be reversed in the future, but for now, they offer partial protection.
B. State-Level Protections
At least 14 U.S. states have enacted laws that restrict or prohibit the use of medical debt in credit reporting. A 15th state is expected to follow suit by the end of 2025.
States such as:
- California, Colorado, Nevada, and Washington
- New York, Illinois, and Maryland
…have laws that either ban the inclusion of medical debt entirely or impose strict requirements for reporting.
If you live in one of these states, your state law may shield you from the credit impact of medical debt—even in the absence of federal protection.
V. Why Medical Debt Still Matters to Your Credit
Despite ongoing reforms, medical debt remains on over 20% of U.S. credit reports. Its presence can have wide-ranging financial consequences:
A. Credit Score Impact
Medical debt can lower your score, particularly if it is unpaid and exceeds $500. This can:
- Disqualify you from mortgage or auto loan approvals
- Increase your interest rates on loans and credit cards
- Raise your insurance premiums
- Make renting a home more difficult
According to CFPB studies, removing medical debt could increase approval rates and reduce default predictions with little downside.
B. Disproportionate Impact on Vulnerable Groups
Medical debt disproportionately affects:
- Low-income households
- Black and Latino communities
- Uninsured and underinsured individuals
- Those in the South and Midwest
A Kaiser Family Foundation (KFF) study showed that people in these groups are more likely to carry large balances and less likely to resolve disputes quickly due to systemic barriers.
VI. What Consumers Should Know and Do Now
With medical debt still affecting credit in most states, here’s what you can do to protect your score:
1. Check Your Credit Reports Regularly
You are entitled to one free credit report every week from each bureau at AnnualCreditReport.com. Check your report for:
- Medical collections
- Inaccurate balances
- Accounts listed multiple times
- Debts that have been paid but not updated
2. Dispute Errors Promptly
The FCRA gives you the right to dispute incorrect or unverifiable information. This includes:
- Incorrect amounts
- Duplicate collections
- Debt that’s not yours
- Insurance delays that caused collections
Submit a written dispute directly to the credit bureau or use their online portal. Include documentation like payment receipts or insurance letters.
3. Validate Debts in Collections
If a medical bill has been sent to collections, request validation from the collection agency under the Fair Debt Collection Practices Act (FDCPA). They must provide:
- Details of the original creditor
- Itemized billing
- Proof that the debt is valid and yours
If they fail to validate, request that the debt be removed from your credit report.
4. Negotiate with Medical Providers
Hospitals often offer:
- Financial hardship programs
- Income-based sliding scales
- Interest-free payment plans
Negotiating directly can prevent your account from being sent to collections. Request documentation showing you are making payments.
5. Use Nonprofit Services
Organizations like Undue Medical Debt purchase portfolios of medical debt and forgive it for free. Some local governments and churches also fund medical debt relief programs.
VII. What This Means for the Future of Credit Reporting
The court’s decision to strike down the CFPB rule raises new questions about the future of credit reporting and consumer protection.
A. State vs. Federal Regulation
With the CFPB blocked at the federal level, many states may accelerate efforts to protect their residents. This could lead to a fragmented system where your ZIP code determines your credit fate.
B. The Role of the Credit Bureaus
While the bureaus have made voluntary changes, advocates fear that without legal backing, those changes could be reversed. Maintaining public pressure is key.
C. Ongoing Advocacy
Consumer advocates are expected to continue pushing for legislative reform. Possible future developments include:
- Congressional legislation to ban medical debt reporting
- Additional CFPB rulemaking under other legal authorities
- Updates to scoring models (FICO and VantageScore) to de-emphasize or ignore medical collections entirely
VIII. Conclusion
Although the court decision blocks the nationwide removal of medical debt from credit reports, it does not mean consumers are without options. Credit bureaus have already implemented policies that remove certain medical debts, and many states are stepping up to pass their own protections.
If you have medical debt, the most important actions you can take are:
- Understand your rights
- Review your credit reports regularly
- Dispute inaccurate or invalid entries
- Communicate with healthcare providers and collectors
- Take steps to resolve legitimate balances before they hurt your credit
Credit Repair of Florida is here to help if you’re struggling with inaccurate medical debt or other damaging items on your credit report. We provide compliant, ethical credit repair services tailored to your situation.