The consumer watchdog has said the new law will lead to an increase in fines and low-cost loans of up to 22,000 a year.
Two groups that represent credit reporting companies and government agencies have filed a lawsuit challenging a new law that US President Joe Biden is issuing bans the inclusion of medical debt in the credit reports of American consumers.
The Consumer Data Industry Association and Cornerstone Credit Union League filed the lawsuit in federal court in Sherman, Texas, on Tuesday, shortly after the US Consumer Financial Protection Bureau. he finished the law.
The agency said the law would remove $49bn in medical debt from the credit reports of nearly 15 million Americans. This was approved even though Republicans in Congress want Biden's economic administration to stop issuing new rules as President-elect Donald Trump prepares to take office on January 20.
Trade groups say the law violates the Fair Credit Reporting Act, which allows consumer reporting agencies to report medical credit information and allow creditors to consider what they know.
“It is a black letter law that an agency cannot prohibit through legislation that Congress has expressly authorized,” the lawsuit said. “Because the final rule is inconsistent with this rule, it must be repealed.”
The case was assigned to US District Judge Sean Jordan, a Trump appointee. The CFPB declined to comment.
According to the CFPB, a medical loan provides little information to show that the borrower can repay the loan and this change should lead to an increase in interest rates and could lead to an additional 22,000 annual low-cost payments.
The new law will also prevent lenders from taking medical information into account when making loan decisions and help prevent debt collectors from forcing consumers to pay bad debts they don't owe, the agency said.
Bank and credit union trade groups said the ban could leave them blind to information about the risks financial institutions face from borrowers and could lead to banks lending less, not more.