In late October, the Consumer Financial Protection Bureau (CFPB) published an interpretive rule, Colorado HB 23-1126, that issued new guidance prohibiting states from removing medical debt from consumers’ credit reports, and now an industry group is taking the fight to the states.
In early November, ACA International filed a lawsuit in Colorado challenging HB 23-1126, which has been in effect since August 7, 2023. ACA’s lawsuit outlines why Colorado HB 23-1126 violates the preemption provision of the federal Fair Credit Reporting Act (FCRA) and conflicts with the legislative history of the FCRA and how it was written.
Colorado HB 23-1126 has had a real impact revenue recovery. According to Americollect studies, a real reduction of nine percent of collection occurred with the removal of medical debt from credit reporting. It’s likely that an additional reduction occurred when patients discovered that medical debt could not be put on their credit reports.
This change impacted how medical bills were viewed by patients, relegating these bills to the bottom of the stack since there were no consequences for non-payment. When healthcare systems have the choice of using credit bureau reporting as an Extraordinary Collection Action, it opens the opportunity for a net positive of a real nine percent increase in bad debt collections.
The lawsuit against Colorado HB 23-1126 also covers how the law infringes on First Amendment protections for truthful commercial speech. ACA International contends that states cannot selectively ban accurate debt information because it creates a patchwork of conflicting regulations, undermining the uniform national credit system that was established by Congress.
The lawsuit, which was just announced, is separate from the CFPB rule that was vacated in July after a judge ruled in favor of Cornerstone Credit Union and Consumer Data Industry Association. The CFPB filed a report in federal court after the ruling that it would not be reissuing the advisory opinion.
Laws like Colorado HB 23-1126 have a real impact on facilities like yours. If the choice is between making payroll or not, an effort to put balances on the credit bureau is a real decision that needs to be made. Americollect will continue to follow the ACA lawsuit against Colorado HB 23-1126 as it advances.
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