A federal judge on Friday vacated a Biden-era rule that would have stripped medical debt from consumer credit reports, siding with credit-industry and Trump-administration arguments that regulators overreached.

What Happened: According to a Reuters report, U.S. District Judge Sean Jordan said the Consumer Financial Protection Bureau rewrote the Fair Credit Reporting Act when it finalized the policy in January, a move he ruled exceeded the agency's authority.

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His decision blocks a measure the CFPB estimated would erase about $49 billion in liabilities from the records of 15 million Americans and bar lenders from using medical data in loan decisions. The judge, a 2019 Donald Trump appointee, noted that Congress lets credit bureaus report coded medical debts and that federal law pre-empts stricter state limits.

Experian, Equifax and TransUnion argued the rule would give lenders an incomplete picture of a borrower's ability to repay, even after they voluntarily stopped listing medical collections under $500 in 2022. "This is the right outcome for protecting the integrity of the system," Consumer Data Industry Association chief executive Dan Smith said.

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Why It Matters: The Biden administration adopted the ban after research showed medical bills, which include shocks from accidents or hospital stays, distort credit scores yet reveal little about long-term solvency. Roughly one in 12 adults carries at least $250 in unpaid medical debt. A CFPB statement in January called the measure a common-sense fix for families who would see scores rise by as much as 20 points.

Consumer advocates condemned Friday's ruling and urged the White House to appeal, but the Justice Department has not defended the rule since the CFPB reversed course under President Trump. The policy's fate grew uncertain after that reversal, warning millions could still face higher borrowing costs.

The now-vacated rule anchored a broader White House strategy that also steered Medicaid funds to North Carolina hospitals that forgave patient balances.

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This article Texas Judge Blocks Biden-Era Rule Meant To Erase $49 Billion In Medical Debt From Credit Reports originally appeared on Benzinga.com

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