A trade group representing debt collectors has filed a lawsuit challenging the Consumer Financial Protection Bureau's final rule banning medical debt from credit reports, the second suit to be filed against the bureau this week.
ACA International and Specialized Collections Systems, a Houston-based debt collector, filed a
Two other trade groups
Both lawsuits claim the CFPB's medical debt rule is politically motivated and violates the Administrative Procedure Act. And both lawsuits allege the CFPB relied on its own internal, but outdated, research and ignored more recent studies that showed the importance of medical debt information in determining a borrower's ability to repay a loan.
But the lawsuits differ on standing, venue and location. The debt collectors claim their First Amendment rights were violated and that the CFPB is unconstitutionally funded — legal arguments that creditors did not make.
The Consumer Data Industry Association and the Cornerstone Credit Union League filed their lawsuit on Tuesday in the U.S. District Court for the Eastern District of Texas, where the trade group considers judges more sympathetic than in the Southern district of Texas. It is expected that the courts will roll the two suits into one with the first suit filed claiming jurisdiction.
Both lawsuits allege that the CFPB does not have the statutory authority to issue the rule under the plain text of the Federal Credit Reporting Act. But the debt collectors' complaint goes further, alleging the CFPB is violating the First Amendment by preventing "the communication of accurate information without a legitimate state interest."
"Upon enactment ACA creditor members will lose their First Amendment right to receive medical debt information," from credit reporting agencies, the suit states. "And [credit] furnishers lose their right to convey information about medical debt to other creditors and consumers."
Scott Purcell, the trade group's CEO, called the rule a "power grab" that will harm lenders and small businesses and "put many critical care facilities on life support" if medical bills remain unpaid.
The debt collectors also claim that the CFPB is "unconstitutionally funded," through the Federal Reserve Board, even though the Supreme Court decision last year
The CFPB's funding was not raised in the creditors' lawsuit. The ACA suit relies on
"The CFPB lacked constitutionally appropriated funding when it published the Notice of the Final Rule on January 7, 2025, and will lack such funds when the Final Rule is published in the Federal Register," the suit states. "As such, the Final Rule and the CFPB's associated rulemaking violates the Appropriations Clause and must be vacated."
The rule banning medical debt would take $49 billion in medical debts off credit reports — though consumers would still owe the debts. The CFPB claims credit scores will rise by an average of 20 points, which creditors say will simply artificially inflate credit scores, making underwriting more difficult.
While the trade groups acknowledge that medical debt is a serious issue, they argue that the CFPB's rule would suppress information about medical debts and that the CFPB has no jurisdiction to address the complex web of health insurance or the health care market.
"Erasing a massive swath of debt information from the credit reporting system will make credit reports less useful and reliable and could lead to bad underwriting, similar to what caused the 2007 financial crisis," ACA said in a press release. "In other words, consumers may be granted additional loans they cannot afford."
