Brownstein Challenges Colorado Law Prohibiting Medical Debt Reporting

On the heels of the Consumer Financial Protection Bureau’s (CFPB) interpretive rule issued last week explaining that the Fair Credit Reporting Act (“FCRA”) generally preempts state laws related to credit reporting, Brownstein filed a lawsuit on behalf of ACA International challenging Colorado House Bill 23-1126. HB 23-1126 prohibits consumer reporting agencies from reporting accurate information about medical debts in credit reports. Brownstein argues HB 23-1126 is unlawful two times over. First, Brownstein argues that HB 23-1126 is preempted by the Fair Credit Reporting Act (FCRA) because it expressly prohibits what FCRA expressly allows (medical debt reporting). Second, Brownstein argues that HB 23-1126 violates the First Amendment because it unreasonably restricts accurate commercial speech.

Brownstein’s lawsuit follows an earlier victory vacating the Consumer Financial Protection Bureau’s (CFPB) proposed rule that would have similarly restricted medical debt reporting at the federal level.

Background

On Jan. 14, 2025, the CFPB issued a final rule effectively removing medical debt information from consumers’ credit reports. The rule faced immediate legal challenges, including a challenge brought by Brownstein, representing ACA International. The challenges argued that the rule far exceeded the CFPB’s statutory authority, violated the First Amendment and violated the Administrative Procedure Act. After President Trump’s inauguration, Brownstein advocated before the CFPB urging the new administration to rescind the rule. Weeks later, the CFPB filed a motion seeking to do just that. The court permitted the CFPB to do so, finding that FCRA’s clear text prohibited the CFPB’s rule. As part of that decision, the court also indicated that a state rule also prohibiting medical debt reporting would be preempted by FCRA.

Colorado House Bill 23-116—passed during the 2023 legislative session—prohibits the inclusion of nearly all medical debt in consumer reports. HB 23-116 follows the growing trend of states—now totaling 15, including New York, Delaware, California and Maine—that have enacted laws prohibiting the reporting of consumer medical debt to credit bureaus. These laws vary in scope: some ban credit reporting agencies from including medical debt altogether, while others restrict health care providers and debt collectors from furnishing such information.

As Brownstein has argued before the CFPB and federal courts across the country, these laws are tremendously damaging to the American credit system. Medical debt makes up 57% of consumers’ debt information, meaning that these laws hide over half of consumers’ debts. The debts remain valid and owed, removing them from credit reports only lowers the chance that consumers will know the debts exist and that health care providers will be paid. Moreover, the creditors that rely on credit reports to make lending decisions do not receive a full picture of a consumer’s creditworthiness when a majority of consumers’ debts are hidden. This invites the kind of uninformed credit decisions that caused the 2007 financial crisis.

ACA’s Lawsuit Challenging Colorado’s Ban on Medical Debt Reporting

In its lawsuit challenging HB 23-116, Brownstein argues the law is preempted by FCRA (because it expressly prohibits what FCRA clearly allows) and violates the First Amendment’s protection of valid, accurate commercial speech.

First, Brownstein argues that HB 23-1126 is preempted because FCRA expressly allows consumer reporting agencies to report coded medical debt information. The FCRA’s express preemption provision—at § 1681t(b)—addresses the exact subject matter that states cannot regulate: the specific content of consumer reports. Confirming this result is the fact that the FCRA was passed specifically to establish “uniform, national standards in the area of credit reporting.” Because HB 23-1126 disrupts those “uniform, national standards” by prohibiting what the FCRA expressly allows, it is preempted by federal law.

Second, Brownstein argues that HB 23-1126 violates the First Amendment by imposing content-based restrictions on accurate commercial speech without sufficient justification. HB 23-1126’s ban on medical debt reporting targets specific content and specific uses of that content. In doing so, HB 23-1126 draws arbitrary lines between medical debts and other types of necessary, critical expenses, like housing or food costs. This kind of subjective line-drawing must be narrowly tailored to advancing legitimate state interests. But HB 23-1126 is not narrowly tailored  to advancing any specified interests at all.

CFPB Actions

On Oct. 28, the CFPB issued an interpretive rule to clarify that the FCRA generally preempts state laws that touch on broad areas of credit reporting, consistent with Congress’ intent to create national standards for the credit reporting system. This interpretive rule replaces a July 2022 interpretive rule that the bureau withdrew in May 2025.

The CFPB notes in its interpretive rule:

“… Congress recognized, ‘these uniform national standards … operate in a very fundamental way to expand the opportunity for consumers to get access to credit and a broad range of financial services. What they really do is allow you to take your reputation with you as you travel around the country.

‘Thus, instead of the unified national credit market that we have today, lending and underwriting decisions would have to be based in part on where a borrower lives, since the information available to a creditor making a lending decision could be better or worse depending on the borrower’s State. The utility of credit reports would be undermined because lenders would no longer be able to accurately compare consumers across the country.’”

Next Steps

Looking ahead, the CFPB will remain central to the debate over medical debt reporting. Its recent interpretive rule signals a clear intent to reinforce the FCRA’s national framework and limit state experimentation in this space. At the same time, litigation like Brownstein’s challenge to Colorado’s HB 23-1126 will test the boundaries of federal preemption and the First Amendment in the credit reporting context. Ultimately, the resolution of these disputes, whether through the courts, Congress or regulatory recalibration, will shape how medical debt is treated in the American credit system for years to come.

This alert was compiled with the help of Luke Sadowski.

---

THIS DOCUMENT IS INTENDED TO PROVIDE YOU WITH GENERAL INFORMATION REGARDING A CASE BROUGHT FORWARD BY BROWNSTEIN REGARDING CFPB REGULATIONS. THE CONTENTS OF THIS DOCUMENT ARE NOT INTENDED TO PROVIDE SPECIFIC LEGAL ADVICE. IF YOU HAVE ANY QUESTIONS ABOUT THE CONTENTS OF THIS DOCUMENT OR IF YOU NEED LEGAL ADVICE AS TO AN ISSUE, PLEASE CONTACT THE ATTORNEYS LISTED OR YOUR REGULAR BROWNSTEIN HYATT FARBER SCHRECK, LLP ATTORNEY. THIS COMMUNICATION MAY BE CONSIDERED ADVERTISING IN SOME JURISDICTIONS.