A medical debt collection bill was introduced yesterday in the Louisiana Senate by a Republican which would place a number of restrictions on how medical debts could be collected in the state. The proposed legislation, titled the Louisiana Medical Debt Protection Act, would significantly alter how medical creditors and third party collectors operate by capping interest rates, limiting garnishment practices, and prohibiting certain enforcement actions tied to medically necessary care.
At a high level, the bill signals a continued push by states to carve out medical debt as a distinct category of consumer obligation, with rules that differ materially from traditional consumer credit.
Here are the key provisions industry participants should be watching:
Interest Rate Cap
- Interest on medical debt tied to medically necessary care would be capped at 2% annually
- Any contract attempting to impose a higher rate would be considered void
Garnishment Restrictions
- Wage or bank account garnishment would be prohibited unless a consumer earns more than 400% of the federal poverty level
- Even then, garnishment could not reduce income below that threshold
Limits on Liens and Foreclosure
- Creditors and collectors would be barred from placing liens on or foreclosing against a consumer’s primary residence or primary vehicle for qualifying medical debt
Contractual Requirements for Third Party Collections
- Healthcare providers and medical creditors would be required to include provisions in contracts with third party collectors that prohibit certain garnishment and lien practices
- Failure to include these provisions would itself be considered a violation
Enforcement and Litigation Risk
- The Louisiana Attorney General would have authority to enforce the law and seek civil penalties
- The bill creates a private right of action, allowing consumers to recover damages, statutory penalties, attorney fees, and injunctive relief
Why it matters: This proposal adds to a growing trend of states placing tighter controls on medical debt collections, particularly around affordability and essential asset protection. For collection agencies, debt buyers, and healthcare revenue cycle partners, the bill introduces both operational constraints and increased compliance exposure.
If enacted, companies operating in Louisiana would likely need to reassess interest application, legal recovery strategies, vendor agreements, and overall segmentation of medical debt portfolios. The inclusion of a private right of action, in particular, raises the stakes for compliance execution.
