Representatives from the credit reporting and credit union industries filed a lawsuit Wednesday arguing that the Biden administration’s new rule blocking creditors from accessing consumers’ medical debt violates federal law.

The Consumer Data Industry Association and the Cornerstone Credit Union League filed the lawsuit in a Texas federal court, hours after the Consumer Financial Protection Bureau finalized the rule. 

They say the rule runs afoul of the Fair Credit Reporting Act, a 1970 law that authorizes consumer reporting agencies to access information about medical debt and consider it before deciding whether to extend credit. 

“It is black letter law that an agency cannot prohibit through regulations what Congress has expressly permitted by statute,” the lawsuit said. “Because the final rule contravenes the statute, it should be vacated.” 

U.S. District Judge Sean Jordan, who was appointed by President-elect Donald Trump during his first term, will oversee the case. 

The Biden administration on Tuesday finalized the new rule that would ban medical debt from appearing on credit reports, erasing $49 billion in unpaid bills from the records of 15 million Americans. 

The rule blocks credit cards, banks, auto dealers and other lenders from using medical information when making loan decisions. It also bans lenders from using medical devices such as wheelchairs and prosthetic limbs as collateral for loans, and bars them from repossessing devices if patients can’t repay a loan. 

Banking groups have sharply criticized the rule, arguing that it may result in borrowers being extended more credit than they could afford. They say the rule would increase the cost of credit while decreasing its availability. 

• Jeff Mordock can be reached at jmordock@washingtontimes.com.