Medical Debt Collection Agency Compliance: New Laws & Best Practices For 2026

Key Takeaways

• Healthcare providers are managing new state-level mandates in 2026, including laws in Oregon and Maryland that prohibit medical debt from appearing on credit reports.
• Financial responsibility is increasing; the average single coverage deductible reached $1,886 in 2025, a 17% increase over the last five years.
• Patient collections are now the primary revenue concern for 71% of providers, who report that average collection times exceed 30 days.
• Compliant recovery strategies focus on HIPAA and FDCPA adherence through non-credit-damaging methods.
• Leading healthcare collection agencies operate on a contingency-only model, so providers only pay when funds are successfully recovered.

Healthcare providers are now faced with changes in how medical debt is reported and collected. These laws require a transition away from credit-based pressure tactics toward educational and voluntary payment models to protect both revenue and patient trust.

Federal Status: CFPB Medical Debt Rule Vacated

The Consumer Financial Protection Bureau (CFPB) finalized a rule on January 7, 2025, that sought to remove approximately $49 billion in medical bills from the credit reports of 15 million Americans. This rule was designed to prevent lenders from using medical information in credit determinations.

However, the legal status of this federal ban is currently stalled. On July 11, 2025, the U.S. District Court for the Eastern District of Texas vacated the rule in its entirety, ruling that it exceeded the CFPB's statutory authority under the Fair Credit Reporting Act (FCRA). While the federal rule is not currently in effect, its introduction has influenced state-level legislation and shifted patient expectations toward greater financial protection. Providers should note that as of late 2025, the CFPB has issued interpretive rules suggesting that while the federal ban is nullified, they will continue to monitor aggressive collection practices that may violate existing consumer protections.

State Laws Restricting Medical Debt Reporting in 2026

While federal rules remain in litigation, several states have implemented their own reporting bans. These laws create specific compliance requirements that providers must follow based on where their patients reside.

Oregon's SB 605: Effective January 1, 2026

Oregon's Senate Bill 605 prohibits healthcare providers from reporting the existence or amount of medical debt to any consumer reporting agency. Key provisions include:

• Broad Definition of Medical Debt: The law covers all monetary obligations related to medical services, including debts that are not yet past due.
• Reporting Prohibitions: Both providers and their collection agents are barred from furnishing information to credit bureaus.
• Voided Debt Penalties: If a provider violates this act, a court may declare the underlying medical debt void and uncollectible.
• Mandatory Screening: Hospitals must screen patients for financial assistance eligibility before initiating any collection actions.

Maryland's HB 1020: The Fair Medical Debt Reporting Act

Maryland's law took effect on October 1, 2025, and established near-total exclusions for medical debt from consumer credit reports.

• Prohibited Disclosures: Debt collectors and medical providers are barred from disclosing any portion of a medical debt to a reporting agency.
• Contractual Compliance: Any agreement entered into after October 1, 2025, between a provider and a collection entity must include a provision prohibiting credit reporting; otherwise, the contract is void.
• Deletion Requirements: Hospitals were required by November 1, 2025, to instruct credit bureaus to delete any adverse medical debt information previously reported.

No Surprises Act: Maintaining Compliance for Out-of-Network Collections

The No Surprises Act remains a cornerstone of federal medical debt regulation in 2026. This law requires specific verification steps before any out-of-network debt can be pursued.

Market Rate Verification

Collectors must verify that billed charges for out-of-network services reflect "reasonable" market rates as defined by federal guidelines. This process involves:

• Comparing charges against regional benchmarks.
• Documenting the verification process to withstand federal audits.
• Ensuring that patients were provided with a Good Faith Estimate (GFE) before the service.

Documentation and Audit Protection

To protect against penalties from the Office of Inspector General (OIG), agencies must maintain logs of all patient communications and rate comparisons. These records are essential for resolving disputes through the Independent Dispute Resolution (IDR) process if a patient or insurer challenges the billed amount.

The Growing Financial Burden on Patients

The shift in collection laws coincides with a significant increase in patient out-of-pocket costs. KFF's 2025 Employer Health Benefits Survey highlights the scale of this challenge:

• Higher Deductibles: The average annual deductible for single coverage is now $1,886.
• Long-term Trends: This represents a 43% increase in deductibles over the past decade.
• Cost Sharing: Approximately 34% of covered workers are now in plans with deductibles of $2,000 or more.

These financial pressures have made patient collections the primary revenue concern for healthcare executives. J.P. Morgan's 2025 report notes that 71% of providers struggle with collection timelines exceeding 30 days, often due to patient confusion over complex billing statements.

HIPAA and FDCPA Compliance Standards

Effective recovery in 2026 requires specialized knowledge of both the Health Insurance Portability and Accountability Act (HIPAA) and the Fair Debt Collection Practices Act (FDCPA).

Specialized Staff Training

Collection agents must be trained in the "minimum necessary" standard of HIPAA, ensuring they only access the specific health information required to resolve a debt. Furthermore, FDCPA compliance requires:

• Providing clear validation notices to patients within five days of initial contact.
• Respecting patient communication preferences (e.g., opting out of phone calls in favor of email).
• Avoiding any threats of credit reporting in states like Oregon or Maryland, where such actions are now illegal.

Prioritizing Education and Flexibility

The most effective compliance strategies in 2026 emphasize patient education. Many patients are willing to pay but are overwhelmed by the complexity of their bills. Best practices include:

• Offering flexible, interest-free payment plans.
• Explaining insurance EOBs (Explanation of Benefits) to help patients understand their exact responsibility.
• Utilizing digital payment portals to reduce friction, as 62% of consumers now prefer to pay medical bills online.

Performance Metrics: In-House vs. Specialized Partners

Managing the 2026 regulatory compliance in-house can be resource-intensive. Industry data suggests that specialized firms can often resolve denials and aging accounts more effectively than internal teams.

• Denial Management: While in-house teams often see higher claim denial rates, specialized partners using focused coding accuracy and denial management can maintain rates as low as 2% to 5%.
• Cost Efficiency: Outsourcing can reduce the administrative burden on front-office staff, allowing them to focus on patient care and scheduling.

Recovery Solutions That Will Work In 2026

The key to success is to implement a compliance-first approach to healthcare debt. The cornerstone of this approach is an omnichannel outreach strategy involving phone, email, and text, all tracked via software that monitors every promise to pay.

Leading medical collections agencies focus on transparency:

• Contingency-Only: Clients pay only a percentage of what is successfully collected.
• No Upfront Fees: There are no costs to start the recovery process, reducing financial risk for the provider.
• Regulatory Adherence: All collectors are trained in current state and federal laws, ensuring that recovery efforts do not expose the provider to legal risk or reputational damage.

Working with a compliant multistate healthcare collections agency helps healthcare providers manage the challenges of 2026 by maintaining effective collection rates while preserving the patient relationships essential for long-term practice success.

Southwest Recovery Services
City: Addison
Address: 16200 Addison Road Suite 260
Website: https://www.swrecovery.com/