Americans’ medical debt can stay in credit reports, judge rules. What does that mean?

A federal judge has ruled that medical debt can remain on Americans’ credit reports, cancelling a policy set in place by the Biden administration to help relieve the burden of healthcare expenses weighing on nearly a third of the population.

The ruling — handed down by U.S. District Court of Texas’ Eastern District Judge Sean Jordan on Friday — was a major blow to the Consumer Financial Protection Bureau (CFPB), which has fought against medical debt as a metric of credit worthiness.

In the waning days of the Biden administration in January, the federal banking and financial services watchdog introduced a rule to disallow medical debts from appearing on American credit reports in effort to keep that information from influencing lenders that consider medical expenses to assess borrowers’ merit.

“People who get sick shouldn’t have their financial future upended,” then-CFPB Director Rohit Chopra said at the time. “The CFPB’s final rule will close a special carveout that has allowed debt collectors to abuse the credit reporting system to coerce people into paying medical bills they may not even owe.”

Credit scores factor into a person’s ability to rent or buy a home, secure a car loan, and other major financial decisions that can determine one’s socioeconomic footing.

In its January order the CFPB cited its 2014 research which found that medical debt was not a good indicator as to whether or not a borrower would default on loans, and therefore, was not a necessary inclusion on credit reports.

But Cornerstone Credit Union League, which brought suit against the agency that same month, argued that the CFPB’s order had exceeded the independent agency’s authority.

Judge Jordan agreed, writing in his decision last week that every major “substantive provision of the Medical Debt Rule” had breached the reach of the CFPB’s jurisdiction.

Following Jordan’s ruling, certain advocacy groups decried the move as a blow to the millions who carry medical debt.

“This ruling is a disappointing setback—but it will not stop the growing movement to protect people from the financial harm of medical debt,” Colin Reusch, policy director at Community Catalyst, a nonprofit that advocates for health care affordability, said in a statement.

“A court sided with corporate profiteers, rather than the public.”

But the Consumer Data Industry Association (CDIA), a trade association representing some of the nation’s major credit bureaus, said the judge’s ruling will help protect lenders against granting loans to borrowers unlikely to make good on their debts.

“America’s financial system is the best in the world because it is based on a full, fair and accurate credit reporting system,” CDIA president and CEO Dan Smith said in a statement to NPR. “Information about unpaid medical debts is an important element in assessing a consumer’s ability to pay. This is the right outcome for protecting the integrity of the system.”

An estimated 100 million U.S. citizens carry healthcare debt, according to an investigation by Kaiser Health News and NPR, creating a problem that is uniquely American. Those with high health care debts are at risk of homelessness and other hardship.

More than a dozen states have introduced laws to keep medical debt from affecting U.S. consumers’ credit, but the topic remains controversial.

Congressional Republicans have denounced the CFPB’s attempts to erase medical debt from credit reports. And onetime Trump ally and former Department of Government Efficiency orchestrator Elon Musk has called for the elimination of the agency altogether.

“Delete CFPB,” he wrote in a post on X last year.