A District Court judge in California has denied a motion to dismiss filed by the credit reporting agencies in a lawsuit over their decision to exclude medical debts under $500 from consumers’ credit reports.
The background: The case was filed after the credit reporting agencies jointly announced that medical debts under $500 would no longer be included on consumer credit reports. The plaintiffs, a medical provider and a collection agency working on behalf of multiple medical practices, argued that the change significantly reduced the incentive for patients to pay their outstanding medical bills.
- The lawsuit alleges that removing medical debt tradelines from reports devalues the reporting service that furnishers historically relied on, increases the cost of collecting unpaid accounts, and interferes with patient contracts that obligate individuals to pay for medical services received.
- The complaint asserted violations of antitrust laws as well as tortious interference with existing contracts.
The ruling: In denying the motion to dismiss, Judge Daniel J. Calabretta of the District Court for the Eastern District of California found that the collection agency plaintiff plausibly alleged harm resulting from the credit reporting agencies’ coordinated decision to stop accepting and reporting certain medical debt data. Judge Calabretta concluded that the alleged “devalued service” could constitute a cognizable injury because the collection agency had a direct contractual relationship with the credit bureaus and furnished medical debt data to them.
- One notable line from the decision highlights the court’s view that the injury need not be speculative: “It is plausible that there is a devalued service for suppliers of medical debt information where Defendants are alleged to have agreed to stop reporting certain types of information,” Judge Calabretta wrote.
- The judge also allowed tortious interference claims to proceed, finding sufficient allegations that the credit reporting agencies knew of contracts between medical providers and their patients, and that removing medical debts from reports could disrupt those payment obligations.
- The ruling noted that the defendants allegedly “removed a major incentive for patients to pay their medical bills” and may have indicated to patients that “they no longer need to worry about paying their medical bills because Defendants were removing the negative consequence of nonpayment.”
- While some antitrust claims brought by medical provider plaintiffs were dismissed, the core claims related to the reporting-policy change will move forward.
