Colorado and New York are not waiting for the Fair Credit Reporting Act rulemaking to eliminate creditor use of medical debt announced by the CFPB in September 2023. As we previously blogged, in the past two years, Equifax, Experian, and TransUnion have made significant changes with respect to medical debt collections by removing unpaid medical collections under $500 from consumer credit reports, removing paid medical collections from credit reports, and extending the time period before unpaid medical debt appears on a credit report to one year after the first delinquency.
Colorado has amended the Colorado Consumer Credit Reporting Act, effective August 7, 2023, prohibiting debt collectors and collection agencies from making a false, deceptive, or misleading representation that a medical debt will be included in a consumer report or factored into a consumer’s credit score unless the information is used in connection with a credit transaction involving, or that may reasonably be expected to involve, a principal amount that exceeds the national conforming loan limit value determined annually by the federal housing finance agency, which value is $766,550 in 2024. “Medical debt” means debt arising from health-care services or health-care goods, including products, devices, durable medical equipment, and prescription drugs. Medical debt does not include debt charged to general purpose credit cards that are not issued for the payment of health-care services or health-care goods. “Health-care services” means any services included in or incidental to the furnishing of medical, behavioral, mental health, or substance use disorder; dental, or optometric care; hospitalization; or nursing home care to an individual, as well as the furnishing to any person of any other services for the purpose of preventing, alleviating, curing, or healing human physical illness or injury, or behavioral, mental health, or substance use disorder.
The Colorado amendments also prohibits a consumer reporting agency from providing any consumer report containing any adverse information that the agency knows or should know concerns medical unless the consumer report will be used in connection with a credit transaction involving, or that may reasonably be expected to involve, a principal amount that exceeds the national conforming loan limit value determined annually by the federal housing finance agency. The amendment removed the two prior exceptions from this prohibition of furnishing consumer reports related to a credit transaction with a principal amount of $150,000 or more and underwriting of life insurance with a face value of $150,000 or more.
In its initial written communication to a consumer, a debt collector or collection agency is required to include the following statement:
COLORADO LAW PROHIBITS CREDIT BUREAUS FROM REPORTING MEDICAL DEBT OR FACTORING MEDICAL DEBT INTO A CREDIT SCORE UNLESS THE CONSUMER REPORT IS TO BE USED IN CONNECTION WITH A CREDIT TRANSACTION THAT INVOLVES, OR THAT MAY REASONABLY BE EXPECTED TO INVOLVE, A PRINCIPAL AMOUNT THAT EXCEEDS THE NATIONAL CONFORMING LOAN LIMIT VALUE FOR A ONE-UNIT PROPERTY AS DETERMINED BY THE FEDERAL HOUSING FINANCE AUTHORITY.
These amendments to the Colorado Consumer Credit Reporting Act are repealed effective July 1, 2028. The Department of Revenue is required to study the effect of prohibiting medical debt reporting and, on or before January 1, 2028, report its conclusions from the study to certain legislative committees.
New York has also enacted a new law called the “Fair Medical Debt Reporting Act,” effective December 13, 2023, directed at medical debt. The new law prohibits hospitals, health care professionals, and ambulance services from reporting medical debt to consumer reporting agencies. These entities are further required to include a provision in their contracts with collection agencies and buyers of medical debts prohibiting the agencies and buyers from reporting such medical debts to consumer reporting agencies. The law further provides that any medical debt furnished to a consumer reporting agency shall be void. “Medical debt” means “any obligation or alleged obligation of a consumer to pay any amount whatsoever related to the receipt of health care services, products, or devices provided by a hospital licensed under article twenty-eight of the public health law, a health care professional authorized under title eight of the education law, or an ambulance service certified under article thirty of the public health law.”
These state laws effectively eliminate any furnishing of medical debt to consumer reporting agencies for residents of the states of Colorado and New York. We can expect more medical debt delinquencies as consumers have fewer consequences for their nonpayment. Healthcare providers may shift to seeking court judgments and garnishments or pass through price increases to the consumers who are paying for their healthcare services.