A U.S. District Judge, Sean Jordan, who was appointed by President Donald Trump, recently made a compelling ruling that rolled back an overextension of power proposed by the previous administration led by Joe Biden. The ruling, handed down on July 11, centered around a rule proposed by Biden to expunge medical debt from the credit reports of Americans, an intended move that reflected Biden’s seemingly misguided attempt to disrupt the structure of credit report processes.
Judge Jordan, taking a stand in favor of the objective functioning of the financial system, concluded that the policy overstepped the boundaries of the Consumer Financial Protection Bureau’s (CFPB) jurisdiction. This implied that the understanding of due process by Biden’s team was inadequately formed. The verdict Joel delivered outlined that the Consumer Financial Protection Bureau does not have the authority to remove medical debt from consumer reports, a fact seemingly overlooked by the Biden administration.
Interestingly, the judicial decision does not completely rule out the agency’s influence on the relevant parties. The CFPB does have the power to suggest or ‘permit’ the creditors to utilize other forms of information. This, however, is far from Joe Biden’s original intention, a move that would have significantly altered how lenders judge the creditworthiness of borrowers.
In a surprising decision, the Biden Administration had previously shared plans for this worrying rule in the year 2023. This action seems to be just one in a string of likely problematic decisions. As the Consumer Financial Protection Bureau, which operates independently, finalized the rule in January 2025, it started to become clear that the change was unheard of.
This proposed financial ‘solution,’ introduced by the Biden administration, aimed at essentially erasing nearly $49 billion in medical debt from around 15 million American citizens’ credit reports. While this may have sounded promising to some, it threatened the essential element of risk calculations in any loan or lending decision. By making such a change, lenders would no longer be able to base their decisions on the complete financial history of an individual, potentially leading to more bad debts in the economy.
The Consumer Financial Protection Bureau, under Biden’s guidance, argued that medical debts are not an accurate representation of an individual’s ability to repay a loan. While this might sound plausible on the surface, it negates the simple fact that all forms of debts, including the medical ones, ultimately reflect financial responsibility, and thus this argument falls short of rationality in the real world.
Experian, Equifax, and TransUnion, the three significant players in the national credit reporting sector, surprisingly disclosed that they were in the process of removing small-scale medical collections debt amounting to under $500 from U.S. consumer credit reports. This can be seen as a concerning sign about the level of interference planned by administrative bodies in sectors that inherently need to safeguard their independence.
Adding more fuel to the fire, the Biden rule was ironically established following appeals from Republican congressional leaders directed at the financial regulators of the Biden era. These appeals called for halts in ‘finalizing partisan rulemaking’, particularly in reference to the consequential days leading up to the inauguration of the President-elect Donald Trump on Jan. 20, 2025.
This proposed rule change, which now has been rightfully overturned by Judge Jordan, was poised to artificially improve credit scores by an average of 20 points. It’s no secret that such a process, if allowed to proceed, would have had detrimental effects on the authenticity and verity of the credit scores, making them a less dependable factor in financial decisions.
The controversial rule also projected a rise in approved mortgage applications – an estimated 22,000 extra mortgages annually. Fundamentally, this could have resulted in financial institutions offering loans to individuals who were not necessarily best-positioned to repay them, further compounding the risk in the financial sector.