Tzedek DC and allies have filed in federal court to defend the Consumer Financial Protection Bureau’s rule that will, if upheld, remove an estimated $49 billion in medical debt from the credit reports of 15 million Americans.
Tzedek DC has joined forces with DC resident and father Harvey Coleman, as well as Texas resident and truck driver David Deeds, and the nonprofit group New Mexico Center on Law and Poverty, to defend the rule, with the National Consumer Law Center (NCLC) serving as pro bono counsel.
This coalition filed the motion yesterday seeking permission to intervene on behalf of the CFPB in the lawsuit previously filed by a debt collector, Specialized Collection Systems, Inc., and a trade group for debt collectors, ACA International, in the U.S. District Court for the Southern District of Texas seeking to overturn the Medical Debt rule. The pleadings underscore the necessity of intervention with the CFPB under a shutdown order, which makes the CFPB unable or unwilling to defend its medical debt rule.
The medical debt rule, finalized by the CFPB earlier this year, bans the inclusion of medical bills on credit reports used by lenders and prohibits lenders from using medical information in their lending decisions. This rule, initially set to become effective on March 14, was the product of a lengthy notice and comment period in which Tzedek DC participated.
“The medical debt rule is an important protection for DC residents like Mr. Coleman and the many other people we serve in our legal and financial counseling work who are burdened by the stresses of medical debt,” said Tzedek DC’s Founding President and Director-Counsel Ariel Levinson-Waldman. “The CFPB’s rule came about after careful consideration of ours and many other interested parties’ comments, and its implementation will ensure medical debt doesn’t continue to harm Americans’ access to credit, housing, and jobs. Tzedek DC is proud to stand with NCLC and the New Mexico Center on Law and Poverty in support of the CFPB’s important rule. We’re especially grateful to people like Mr. Coleman and Mr. Deeds and all the allies from around the country for lending their voices to the continued, critical need for this protection.”
Since this lawsuit was filed by the debt collector and its trade association, the Acting Director of the CFPB has told CFPB staff to stop all work, including litigation, and instructed CFPB counsel not to make any appearances in litigation except to seek a pause in proceedings. The CFPB’s rule has also been challenged by an association of credit reporting agencies in another case filed in Texas, and that case has been paused.
Having medical debt on a credit report can make it difficult for individuals to secure lines of credit, including mortgages, car loans, and credit cards. The CFPB has found that medical debts are not predictive of creditworthiness, and amounts of medical debt listed on credit reports have often been inaccurate. Further, medical debt can cause anxiety and depression and is associated with worse physical health. Medical debt is also the leading cause of bankruptcy in the U.S. Upholding the CFPB medical debt credit reporting rule would therefore provide vital protection for consumers.
The legal memorandum in support of the motion to intervene is here. DC resident Harvey Coleman’s Declaration is here. Tzedek DC’s Declaration is here. NCLC’s press release is here.
Related Resources
Press release: 100+ Groups Support the CFPB’s Removal of Medical Debt From Credit Reports, Aug. 12, 2024
Press release: CFPB Proposes Banning Medical Debt from Credit Reports, June 11, 2024
Press release: Consumer Bureau Announces Groundbreaking Plan to Protect Americans from the Devastating Effects of Medical Debt, Sept. 21, 2023
Report: Health Care Plastic: The Risks of Medical Credit Cards, Apr. 27, 2023
Report: The Racial Health and Wealth Gap: Impact of Medical Debt on Black Families, Mar. 9, 2022
About Tzedek DC, Our Medical Debt Work, and the Health Equity Fund
Tzedek DC’s name is drawn from the ancient Jewish teaching “Tzedek, tzedek tirdof,” or “Justice, justice you shall pursue.” Headquartered at the University of the District of Columbia David A. Clarke School of Law, and with offices also in Ward 8, Tzedek DC is a nonprofit organization. Our mission is to safeguard the legal rights and financial health of DC residents with lower incomes facing the often-devastating consequences of debt collection and credit-related obstacles, including those arising from medical debt. This mission is carried out as anti-racism work in response to the massive wealth gaps tracking race in DC and nationwide. Tzedek DC seeks to serve and empower its client base, which is comprised of 90% Black residents, 60% women, and 25% disabled community members. Our strategic approach combines three synergistic activities: (i) free direct services—legal representation and advice, and financial counseling; (ii) working in coalition to make systemic change; and (iii) providing bilingual community legal education on debt collection, identity theft, and credit management. Since 2017, Tzedek DC has served over 5,000 client households in legal matters and catalyzed systemic reforms benefiting hundreds of thousands of DC residents.
A portion of Tzedek DC’s medical debt work is funded by the Health Equity Fund, as administered by the Greater Washington Community Foundation in partnership with the Health Equity Committee. The Health Equity Fund is designated to improve the health outcomes and health equity of residents of the District of Columbia. The historic fund is one of the largest philanthropic funds of any kind focused on community-based nonprofits that serve District residents. Given that 80 percent of DC’s health outcomes are driven by social, economic, and other factors, compared to just 20 percent by clinical care, the Health Equity Fund adopts an economic mobility frame to address the root causes of health inequity and advances a sustainable network of people, organizations, and projects to ensure equitable health outcomes for Black, Brown, Indigenous, People of Color and other marginalized populations in DC.
We are especially grateful to the Health Equity Fund for the support and shared vision of health equity and racial and economic justice.