If you’re a healthcare financial leader, you’re navigating an increasingly complex environment where patient care, compliance, and revenue protection all intersect. A recent federal court ruling has added another layer of change: medical debt is once again permitted to appear on credit reports.
On July 11, 2025, the U.S. District Court for the Eastern District of Texas struck down the Consumer Financial Protection Bureau’s (CFPB) rule that had banned medical debt from credit reports. The ruling also emphasized that federal law preempts state laws that try to block medical debt reporting.
In other words: medical debt can once again be reported to the credit bureaus, provided it’s coded properly to protect patient privacy.
For hospitals and medical providers, this decision has real implications for patient financial engagement, collections strategies, and compliance obligations.
What Was the CFPB Rule?
Earlier this year, the CFPB had finalized a rule prohibiting medical debt from appearing on credit reports altogether. The agency argued that medical debt was an unreliable measure of creditworthiness, often resulting from emergencies, insurance delays, or circumstances outside a patient’s control.
Industry groups challenged the rule, and the court sided with them, affirming that the Fair Credit Reporting Act (FCRA) allows medical debt to be reported so long as personal health details are protected.
What About the $500 Limit?
It’s important to note that the $500 threshold still applies—but not because of the CFPB.
In 2023, the three largest credit bureaus—Equifax, Experian, and TransUnion—voluntarily decided to:
- Remove paid medical debts of any amount
- Exclude unpaid medical debts under $500
This policy remains in place, but it could change at any time since it’s voluntary.
What this means for providers:
- Accounts over $500 can be reported if unpaid.
- Accounts under $500 are currently excluded, but you should keep an eye on any future policy changes.
The State Law Question
Fifteen states, including California, Illinois, New York, and Virginia, have passed laws restricting medical debt reporting. However, this ruling casts doubt on whether those protections will hold, since the court determined that federal law overrides conflicting state laws.
For healthcare systems with multi-state footprints, this creates uncertainty and a need to track ongoing legal developments.
How This Affects Patients — and Providers
While this ruling centers on credit reporting, its effects ripple into patient relationships, compliance, and revenue recovery.
- Patient financial stress: A reported medical debt can significantly impact a patient’s credit score, making them more anxious and less likely to engage early.
- Long-term credit impact: Once reported, an unpaid medical debt over $500 can remain on a patient’s credit report for up to seven years.
- Revenue cycle implications: Providers may see higher recovery potential through credit reporting, but must balance that with patient goodwill and community trust.
Best Practices Moving Forward
As your partner in medical debt recovery, we believe compassionate, compliant practices protect both your patients and your institution. Here are key steps to take:
- Strengthen early engagement
Encourage patients to connect with your financial counselors before debts escalate. Flexible payment plans and charity care options can prevent accounts from being reported at all. - Ensure accurate coding and documentation
With federal privacy rules in play, proper account coding is essential to remain compliant. - Monitor multi-state compliance
Even with federal preemption, state-level challenges are still possible. We can help track and adjust strategies based on evolving laws. - Partner with a compassionate collections agency
Patients deserve empathy, and providers deserve results. Our approach combines respectful outreach with the latest compliance standards—helping patients resolve balances while protecting your revenue cycle.
Looking Ahead
This ruling underscores how dynamic the regulatory environment around medical debt continues to be. We expect further challenges, possible appeals, and potential shifts in credit bureau policies.
Through it all, our priority is clear: supporting your financial team while treating patients with dignity and respect. By blending compliance, compassion, and effective recovery strategies, we can help you adapt with confidence—protecting both your patients and your bottom line. If you have any questions, give us a call at (470) 297-1120. Our experts at Capital Recovery will be more than happy to help you navigate this ever-changing landscape.