Colorado Law Barring Medical Debt From Credit Reports Faces Federal Challenge From Trade Lobby

A national debt collection lobby is challenging a Colorado law that prevents medical debt from appearing on the consumer credit reports of state residents. Enacted in 2023, HB23-1126 required all credit agencies to remove any medical debts in collection, while also not allowing future ones to be added.

In a lawsuit filed in federal court, ACA International is joined by Creditors Bureau USA in challenging the law, arguing that it violated the Fair Credit Reporting Act, as well as the First Amendment of the U.S. Constitution, by restructuring collection communications and limiting what debts can be included on credit reports.

The plaintiffs argue that adverse medical debt information is necessary for lenders to accurately assess a person’s credit history and that removing it challenges the collection process.

“Creditors and lenders who lack a complete picture of a consumer’s credit history may extend a loan the consumer cannot afford, which only hurts their financial situation and increases the cost of credit for everyone,” Jennifer Whipple, ACA’s board president, said in a statement.

The ACA also said that disruption to the credit collection process could negatively impact the quality of patient care—though it isn’t entirely clear how they draw the connection. It appears to be more of a comment on how debt collections are crucial for the financial health of practices.

“ACA members serve medical providers across Colorado,” ACA CEO Scott Purcell said. “Today’s actions are aimed at protecting their ability to operate effectively and deliver quality care to patients while also safeguarding a fair, transparent credit ecosystem that helps keep borrowing costs low for all Colorado consumers.”

The group adds that Coloradans alone owe more than $1 billion in medical debts, something that HB23-1126 “suppresses and hides from creditors.”

Moreover, the plaintiffs argue that HB23-1126 effectively placed “content-based restrictions on protected commercial speech,” in violation of the First Amendment, which protects free expression.

They’re asking a federal court to rule that the state law is unconstitutional under the Supremacy Clause of the U.S. Constitution, wherein federal law and the Bill of Rights always supersede state authority.

Notably, the ban on medical debt reporting in Colorado is a temporary law, set to end in July 2028—though it is possible it could be renewed or extended with legislative action and the support of the governor.