The trade group representing debt collection agencies, creditors, debt buyers, collection attorneys, and debt collection industry service providers has filed suit challenging the Colorado law that bans the inclusion of medical debts in credit reports.
ACA International is joined by one of its members, the Fresno Credit Bureau, in the suit against Martha Fulford, the Colorado Uniform Consumer Credit Code Administrator. The suit was filed in the U.S. District Court for the District of Colorado.
They assert that the Fair Credit Reporting Act (FCRA) specifically allows the inclusion of medical debts as long as they are coded to protect the privacy of patients. They said that Congressional choice reflected a “deliberate balance” that allows for the protection of sensitive health details while preserving the integrity and completeness of credit reports.
The Colorado law, known as HB 23‑1126, “does exactly what Congress sought to prevent: it imposes a state-specific prohibition on reporting medical debt, even when federal law expressly permits such reporting under defined conditions,” ACA and the Fresno Credit Bureau argue.
“HB 23‑1126 creates precisely the patchwork Congress sought to avoid, confirming that it is preempted under the FCRA,” according to ACA and the Fresno Credit Bureau.
“HB 23‑1126 is conflict preempted because it prohibits conduct that federal law expressly [allows],” the plaintiffs allege.
In enacting the law, the legislature overlooked unintended consequences that result from the suppression of truthful information about unpaid medical bills and that harm providers and patients, according to the plaintiffs.
“This type of content-based prohibition not only violates the intent of the FCRA—which aims to create a nationwide, uniform system for sharing accurate credit information—but also imposes an undue restriction on [accurate commercial] speech [in violation of the First Amendment],” ACA and the credit bureau allege.
They said that transparency regarding unpaid medical bills helps creditors’ ability to accurately assess a person’s ability to take on more debt.
The legislation also causes a downgrade for borrowers in Colorado, they assert, saying that lenders cannot assess which Coloradans have unpaid medical debts.
They said that the law is the “top of a slippery slope of states banning reporting of certain categories of debt which sound good to voters. Why not ban reporting of a person’s credit card payment? Food purchased at the grocery store is just as essential as healthcare.”
The plaintiffs seek a declaration that federal law preempts the state law and an order enjoining the defendant from enforcing it.
The lawsuit was filed shortly after the CFPB issued an interpretive rule saying that the FCRA preempts states from regulating the contents of credit reports, calling out specifically state laws that purport to limit the reporting of medical debt information.
