Boston, MA – Two industry groups have recently filed a lawsuit challenging a new rule implemented by the outgoing administration of U.S. President Joe Biden, which prohibits the inclusion of medical debt in American consumers’ credit reports.

The lawsuit was filed by the Consumer Data Industry Association and Cornerstone Credit Union League in federal court in Sherman, Texas. This legal action followed the finalization of the regulation by the U.S. Consumer Financial Protection Bureau, aimed at removing $49 billion in medical debts from the credit reports of approximately 15 million Americans.

Despite objections from Republicans in Congress, the regulation was pushed through by Biden’s financial regulators, with the aim of benefitting consumers by increasing credit scores and potentially leading to an additional 22,000 low-cost mortgages issued annually.

The trade groups argue that the new rule violates the Fair Credit Reporting Act, which allows consumer reporting agencies to include information about medical debt and permits creditors to consider such information in their decision-making processes.

According to the Consumer Financial Protection Bureau, the prohibition of medical debt in credit reports should prevent debt collectors from pressuring consumers into paying debts that are incorrect or unwarranted, ultimately benefiting borrowers.

Industry groups representing banks and credit bureaus have expressed concerns that the ban on including medical debt in credit reports could hinder their ability to evaluate the risk posed by borrowers, potentially resulting in a reduction in loan offerings.

The case has been assigned to U.S. District Judge Sean Jordan, who was appointed by former President Donald Trump. The Consumer Financial Protection Bureau declined to provide any comments regarding the lawsuit at this time.