CFPB asks court to stop medical debt rule

The Consumer Financial Protection Bureau joined other groups in asking a federal court to scrap a regulation barring consumer credit reports from including medical debt.

Details: In a motion submitted in a Texas federal court, the CFPB asked a judge to strike down the rule, saying it had exceeded its legal authority.

Background: The CFPB last year proposed to amend Fair Credit Reporting Act regulations by prohibiting creditors from using medical financial information and by limiting the circumstances under which consumer reporting agencies are permitted to provide medical debt information to creditors.

ICBA View: ICBA in August told the CFPB that the rule would lead to inaccurate reports and added:

• The CFPB does not have the statutory discretion to eliminate the use of all medical debt from consumer reports.

• While the CFPB justifies the proposal by citing concern for accurate credit reports, the proposal would in fact increase the inaccuracy of credit reports by mandating the removal of accurate information.

• The proposal would hinder community bank efforts to comply with other regulatory requirements, such as determining a consumer’s debt-to-income ratio or assessing a borrower’s ability to repay.