David Deeds is in financial trouble, and he's hoping a federal court in Texas can help get him out of it.
Deeds, who is 62 and owes tens of thousands of dollars in medical debt from cancer treatment, is involved in a complicated lawsuit filed by credit industry groups over the Consumer Financial Protection Bureau's medical debt rule.
The rule, finalized in January just weeks before the end of the Biden administration, would have banned the reporting of medical debt from credit reports. At the time, the agency reported 15 million Americans would benefit from the change, removing $49 billion in medical debt from records. It was set to go into effect in March.
But new leadership appointed by President Trump now runs the CFPB. And the agency hasn't just reversed its position on the consumer protection rule — last month, it joined forces with the plaintiffs who filed the suit trying to block it. The agency has not returned a request for comment from NPR.
Over the last few months, Judge Sean Jordan from Texas' Eastern District has twice ordered a stay, delaying the rule's start date to July 28. He is likely to make a ruling on whether or not to vacate it by mid-June.
The outcome of the suit, filed on the same day the rule was issued, has important financial implications for Deeds, as well as the millions more whose medical debt has negatively impacted their credit scores.
"My credit was and is very important to me, because it is necessary to secure housing, transportation, and employment, and make sure that I'm never homeless again," Deeds said in an affidavit filed on Feb. 24, by a consumer advocacy group intervening in the lawsuit.
A cancer diagnosis unravels a decade's worth of credit repair
In 2023, Deeds was diagnosed with pancreatic cancer — and found himself in a situation he had sworn to never be in again.
A decade prior, at age 50, he had been homeless, he wrote in his affidavit. But in the years that followed, he turned things around: With a home and a truck-driving job, he built himself a safety net. And there was a tangible marker of that effort: His credit score had soared from abysmal to officially "good," he said.
But his cancer put him out of work, and his health insurance was insufficient to cover the medical bills from several surgeries, he wrote. The money he'd saved over the years quickly dwindled, leaving several outstanding bills — one of which ended up on his credit report. His credit score dropped into the 500s.
"Once my financial troubles started, the situation just avalanched," Deeds wrote.
The medical debt rule appeared like a lifeline. But it might be short-lived.
Medical debt information matters for borrowers and lenders, credit industry says
In a motion filed at the end of April, CFPB, the defendant, joined the plaintiffs, the Consumer Data Industry Association and the Cornerstone Credit Union League, to "request that the Court enter a final judgment holding unlawful and vacating the Medical Debt Rule because it exceeds the Bureau's statutory authority."
"We believe that Congress is the only one who can act on this and determine whether or not it can be on the credit report," Dan Smith, CEO and president of the Consumer Data Industry Association, told NPR.
"Our intention here is to protect the credit reporting system. To ensure that it is as complete and accurate as possible," he said.
Borrowing and lending are all part of the same ecosystem, Smith said. "And so if there are certain data that is prohibited from being included, then the lender is unable to make a fair and accurate assessment of a consumer's ability to repay a loan. And the entire premise of the credit reporting system is to help facilitate more lending to all consumers."
A comprehensive picture of a person's financial status is beneficial to both lenders and borrowers, he stressed. Anything short of that "puts the consumer at risk of default unnecessarily. You do not want to put a consumer into a loan they can't afford," Smith added.
In the lawsuit, the groups note that the three largest credit bureaus — Experian, TransUnion, and Equifax — have already adopted significant policy changes in removing medical collection items from reports. They no longer list paid medical debts, unpaid medical debt less than a year old (up from the previous benchmark of six months) or medical collections under $500.
Advocates step in to uphold rule
Various advocacy groups have taken up the mantle on behalf of consumers. On May 9, Jordan granted a request by the National Consumer Law Center to represent Deeds and Harvey Coleman, a father from the District of Columbia who has been mired in medical expenses stemming from his daughter's illness, among others.
"The prior version of the agency went through a tremendous amount of work and process and time and consideration to put the rule in place," Jennifer Wagner, an attorney with the National Consumer Law Center, told NPR.
The formal rulemaking process took about two years to complete, beginning in 2023. Over that time, more than 74,000 people weighed in with public comments, which Wagner said included feedback from the American Hospital Association, the American Medical Association and the American Cancer Society, all supporting the rule.
The CFPB also conducted several studies before moving to finalize the rule. The most recent one, from 2024, concluded that "medical debt may be less predictive of whether a consumer will pay a future loan, because medical debts can occur and are collected through unique circumstances and practices. For example, consumers often have limited ability to control the timing and types of medical services that are required."
A 2014 CFPB study found that eliminating medical debt from records would lead to the approval of approximately 22,000 additional affordable mortgages every year and boost credit scores by an average of 20 points.
(Smith and other groups who oppose the rule note that the data that was used in the 2014 study came before the big three credit reporting bureaus voluntarily changed medical debt reporting practices.)
Wagner also pushed back on the CFPB's assertion that the previous agency exceeded its authority. On the contrary, she argued, the agency's new leaders are trying to eschew the guidelines set by the Administrative Procedures Act, by pursuing litigation rather than going through "the appropriate notice-and-comment rulemaking."
States have already started to regulate medical debt's effects
As of 2024, about a dozen states have existing regulations prohibiting or limiting certain effects of medical debt in some form, according to Third Way, a center-left think tank. For example, Arizona restricts debt collectors' ability to garnish wages, including for medical debt. In Connecticut, state leaders have established a program that buys medical debt from collection agencies and hospitals for a penny on the dollar. A law in Minnesota prohibits hospitals from sending bills to collections until they have screened patients for coverage or financial assistance. And California, New York and Colorado have already banned most kinds of medical debt from being included in credit reports.
In light of the current hodgepodge of differing laws, Wagner said, a federal medical debt rule "basically just levels the playing field across the country."
"So instead of people in New York and California getting the benefits of not having medical debt show up on their credit report, it's going to bring in people all throughout the country — in West Virginia and Alabama — where people could really benefit from this as well."
But credit trade groups contend that, similar to the CFPB bypassing Congress, state legislators have also overstepped their authority.
For borrowers, every credit score point matters
For now, millions of people remain in credit score limbo, including David Deeds, whose score in the 500s is considered somewhere between "poor" and "fair."
Sarah Chenven, CEO of Working Credit, a nonprofit that helps consumers build or repair their credit scores, told NPR that even the difference of one or two points could add up to thousands of dollars over the life of a loan.
"If you're on the wrong side of the line, then things are just going to be more expensive. So, if you get a car loan, you're going to get a car loan at 25% interest rather than 5%. And that's going to cost you $200 to $300 more a month … we call it expense inequality: paying more for products that should cost less," Chenven explained.
People whose credit scores are below 600 are considered a bad risk for lenders. "They often do not have access to any financial products … the only options available to you are going to be more predatory products," she said.
The holy grail for many of her clients, she said, is a FICO Score of 660.
"It's really only when you get to that prime credit score that you see any kind of material impact in your life," Chenven said. "That's when you start to see better rates. That's when you start to have access to better options for housing. That's when you have more options and opportunities to pursue your financial goals."
It's possible that consumers could see a jump in their scores in just a few weeks. Judge Sean Jordan is expected to make a ruling on whether or not to vacate the medical debt rule by June 11.
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