We’ve still got some protections against medical debt collectors

And they’re still worth knowing about.

Hey there—

Last week, a listener wrote in with a question:

What is the current state of affairs regarding the rules on credit reporting for unpaid bills?

I remember that there was something during the Biden administration that made it impossible for companies to go after people for small dollar amounts or maybe any dollar amounts regarding medical debt.

Has anything changed with this and if so, what is the threshold if there is one for going after people?

Timely question! Because — as we’ve reported — the Trump administration has moved to sideline the Consumer Financial Protection Bureau, the federal agency that enforces lots of consumer rights, including protections around medical debt.

And there’s good news: Some super-helpful changes to medical-debt collections that started during the Biden administration are still in place. At least for now.

Because these protections don’t depend on federal enforcement.

The big three credit-reporting bureaus — TransUnion, Equifax, and Experian — voluntarily created them.

So it’s a good time to go over those protections — and their limits.

They don’t make it impossible for companies to go after people for medical bills. But they do make it harder.

Smaller medical debts don’t hit credit reports

Since July 2023, medical debts below $500 just don’t show up on credit reports. At all.

When this change got announced, I doubted it’d be a big deal, until I talked with a credit counselor named Lara Ceccarelli.

She told me for lots of people with tons of medical-bill debt — thousands of dollars they couldn’t pay — those thousands often consisted of a pile of smaller debts.

“I see scenarios routinely — I mean, several days a week,” she told me, “where somebody has got five or six different medical bills, all under $500, from the same debt collector, all sitting on the credit report.”

To clean up their credit, back then, her clients needed to pay off those smaller medical bills.

With those debts zapped from the credit report by this new rule, she said, those clients could focus on repaying other debts.

Bigger medical debts take longer to hit credit reports

Even above the $500 threshold, medical bills don’t land on credit reports until they’re at least a year old.

The credit bureaus made this change in 2022, because… you may not actually owe the money.

Stuff like this happens all the time:

• A provider bills you incorrectly — like for something that never happened.

• Your insurance denies payment incorrectly — for something you can show they should pay.

• You qualify to have your bill forgiven, through a hospital’s charity care policy.

In all those situations, you often need time to make your case. (In last week’s podcast, we talked with a listener who spent two years fighting off bills that were just wrong.)

Before the credit bureaus made this change, a bill collector could say, “Hey, while you’re fighting, this is gonna hit your credit report and mess up your credit rating…”

And that threat gave them a lot of leverage.

Especially if you were applying for a mortgage or a car loan or getting a new credit card. Or even applying for a job, or leasing an apartment.

The longer timeline gives you more time to fight.

These two protections — no medical bills under $500, and no medical bills less than one year old —seem to have made a big difference.

I don’t have big-picture stats, but I did talk with Lara Ceccarelli again recently. Here’s what she told me:

Before these protections came online, she said, “I used to have at least one conversation about medical debt a day — usually more.” Now, it’s maybe one or two a week.

What we’re not protected from (and how to manage some of it)

Even though smaller debts don’t hit credit reports… they don’t go away.

Bill collectors can still call and bug you about them, which — as you may already know — can be really, really unpleasant.

And: In some states, hospitals and bill collectors can charge interest on medical debts.

Worst-case: You could still get sued over a bill, even a small one.

How can you know if you might get hit with interest, or even sued over a given debt?

Ask the bill collector.

In 2022, I listened as advocate Eli Rushbanks talked with a debt collector, on behalf of a patient who owed about $1,700 they couldn’t pay.

He asked a bunch of questions, trying to figure out: What were the risks of not paying this debt?

First question: Was this collector working on behalf of the hospital (for a commission)? Or had they bought the debt (meaning they’d keep whatever they collected)?

Because: Whoever owns the debt makes the decisions. Whether or not to sue — and if so, under what circumstances. Or whether to charge interest.¹

In this case, the agency owned the debt. So Eli asked: Did they charge interest? (No.) Did they ever sue on debts? (No.)

Eli sat on hold to get this information. He dealt with a grumpy person on the other end of the line. But he kept his cool, asked calmly, and got answers.

Those answers meant: The patient he was helping had some breathing room. They weren’t about to get hit with a lawsuit.

But, Eli told them, they weren’t necessarily out of danger forever. Down the road, this debt collector could sell the debt to someone else, who might charge interest, file a lawsuit.

So, a bottom line here: Even if you can’t pay a debt, don’t ignore debt collectors entirely. Ask questions. Keep in touch.

We’ll come back to dealing with debt collectors another time. Meanwhile…

Quick CFPB update: It’s in limbo

When we last reported on the Consumer Financial Protection Bureau — the federal agency that enforces a lot of rights — a federal judge had slowed down the Trump administration’s efforts to dismantle the agency.

That order remains in effect, and last week, the New York Times reported that the CFPB put its consumer-response team back on duty. They returned to a backlog of more than 16,000 cases, according to reports of court testimony.

I called the hotline myself on March 20, just to see if human beings were answering the phones — and for what it’s worth, I was able to reach somebody.

Meanwhile, two different judges ordered the CFPB — and other agencies — to bring back lots of workers they had laid off. But the CFPB workers immediately got placed on paid administrative leave.

The current order in the CFPB case runs until a March 28 hearing.

So. In limbo. But not dead. Could be worse!

Till next time,

— Dan

1. Or — also important — whether they’d accept a discounted amount, just to close out the account.