A federal judge in Texas has reversed a Biden-era rule that would have removed medical debt from consumer credit reports. The rule, finalized by the Consumer Financial Protection Bureau (CFPB), was projected to increase credit scores for millions of Americans. But in a ruling issued in July, U.S. District Court Judge Sean Jordan determined that the CFPB had exceeded its authority, effectively halting the policy.

The CFPB had argued that medical debts are an unreliable predictor of a person’s creditworthiness. It estimated that adopting the rule would erase $49 billion in debt from the reports of 15 million Americans, significantly expanding credit access. The CFPB rule followed a 2023 decision by credit bureaus to stop reporting medical debts under $500, a move that laid groundwork for broader reform.

But a recent study from Gies College of Business suggests the policy’s impact may have been more muted than expected.

In The Effects of Deleting Medical Debt from Consumer Credit Reports, Gies finance faculty Julia Fonseca, Victor Duarte, Julian Reif, and PhD student Divij Kohli found that previous medical debt removal by credit bureaus - such as a 2023 policy change to remove medical debts under $500 - had little to no measurable impact on credit outcomes or likelihood of default.

"We studied the removal of medical debts below $500 from credit reports by the three major credit bureaus in 2023 and found that it led to no meaningful benefits in terms of access to credit and overall financial health," said Fonseca, an associate professor of finance at Gies Business. "This is likely because this information doesn't help lenders predict default, and so it wasn't being heavily used to make lending decisions in the first place. We show that the same thing is true for larger medical debts above $500. That information is also not helpful for predicting default."

That pattern held across the board, weakening the case that medical debt meaningfully impacts credit outcomes.

“I expect that the CFPB rule removing the remaining medical debts from reports would also not have meaningfully changed credit outcomes for people with medical debt, had it gone into effect," concluded Fonseca.

The team’s research drew on data from the Gies Consumer and Small Business Credit Panel (GCCP), a dataset with individual-level data on personal and alternative credit as well as small business loans. Because the 2023 intervention was only applicable to debts smaller than $500, the researchers were able to compare consumers just below and just above the threshold to isolate and study any effects of the change. Using approaches like regression discontinuity, they found no evidence that removing medical debts shifted credit scores or influenced lending.

While the broader legal and policy debate continues, the research of Fonseca and her coauthors points to a deeper issue: the persistence of medical debt as a burden on US households, regardless of its visibility to creditors. Fonseca notes that while removing medical debt from credit reports may not shift lending outcomes, the debt itself continues to affect mental and financial well-being.

Explore more about the original research and its findings in our earlier feature. Read more about Gies research, and learn more about Julia Fonseca's work on mortgage lock-in and the "frozen" 2025 housing market.