The debt collection industry, through its trade group ACA International and Fresno Credit Bureau, sued a Colorado official this week, seeking to nullify a state law that stops medical debt from being included on consumer credit reports. The debt collectors claim that the Colorado law is preempted by the Fair Credit Reporting Act (FCRA), the federal law governing consumer credit reports, and that it violates their First Amendment rights.
According to the National Consumer Law Center, 15 states prohibit medical debt from being reported on credit reports.
The debt collector lawsuit, filed Nov. 5, follows the Consumer Financial Protection Bureau’s interpretative rule issued in October, which asserts that the “FCRA generally preempts state laws that touch on broad areas of credit reporting.” The new rule confirmed its withdrawal of its own 2022 guidance that discussed FCRA preemption and allowed for state-initiated protections.
Before this new policy position asserting broad FCRA preemption of state laws, the CFPB had long sought to protect consumers from burdensome medical debt. It itself had issued a rule in January that banned medical debt on credit reports and prohibited lenders from using medical debt in credit decisions. At the time, the CFPB anticipated that 15 million Americans would see $49 billion in medical debt removed from their records as a result. A regional trade association of credit unions and the national trade association of credit-reporting agencies and background-check companies sued the CFPB in a challenge to the rule. A Texas district court blocked the rule in July holding that the CFPB lacked the authority under the FCRA to issue the policy.
