On the day before the Consumer Financial Protection Bureau finalized a rule to keep any medical debt from appearing on consumers’ credit reports, a District Court judge in California dismissed a complaint against the three major credit reporting agencies over their decision to not include medical debts under $500 on consumers’ credit reports, although he did give the plaintiffs the opportunity to refile their complaint.
The case, filed in the Eastern District of California, centers on allegations that the credit reporting agencies conspired to restrain trade in violation of federal and state antitrust laws. Judge Daniel J. Calabretta granted the defendants’ motion to dismiss, citing the plaintiffs’ failure to establish antitrust standing under federal law. However, he allowed the plaintiffs the opportunity to amend their complaint.
The background: The plaintiffs, representing medical service providers, argue that the credit reporting agencies’ 2022 decision to no longer include unpaid medical debts under $500 on consumer credit reports constitutes a conspiracy that harms small and independent healthcare providers. The plaintiffs claim that the change in reporting practices diminishes their ability to incentivize patients to pay bills and forces them to rely on costlier collection methods.
The plaintiffs also allege that the decision to jointly alter reporting practices violates the Sherman Antitrust Act and California’s Cartwright Act, arguing that the agencies’ actions unfairly disadvantage smaller medical practices in favor of larger institutions with greater resources.
The ruling: Judge Calabretta ruled that while the plaintiffs demonstrated Article III standing, they failed to show antitrust standing, a more rigorous standard requiring a direct connection between the alleged antitrust violation and the harm suffered. The judge noted that the plaintiffs did not provide evidence linking their financial losses directly to the credit reporting agencies’ policies. Instead, their injuries were found to be speculative and influenced by independent third-party decisions, such as those of patients and debt collectors.
The court also declined to exercise jurisdiction over the state law claims, given the dismissal of the federal claim. Judge Calabretta emphasized that the plaintiffs could amend their complaint to address these deficiencies within 30 days.
