Medical Debt Collections Lost a “Discovery Channel.” Here’s How Digital Engagement More Than Replaces It

For decades consumer medical debts didn’t get resolved because consumers didn’t know they existed (or didn’t understand them). A surprisingly common “first notice” was the credit report.

That changed—fast. The biggest change occurred April 11, 2023. Near the tail end of this year’s tax season, it will have been three years since that profound change.

What changed in credit reporting (and why it hurts collections performance).

The “big three” nationwide credit bureaus (Equifax, Experian, TransUnion) made two major shifts:

1. They stopped reporting paid medical collections beginning July 1, 2022.
2. They extended the waiting period before unpaid medical collections can appear on a credit report to one year (up from ~180 days), also effective July 1, 2022.

Then the big one for day-to-day medical collections economics:

They removed medical collection tradelines with an initial reported balance under $500 starting April 11, 2023.

A huge portion of medical collections inventory either (a) never hits the credit file, (b) hits much later, or (c) disappears once paid. That means the industry lost a powerful—if imperfect—mechanism that used to prompt consumers to act.

The operational consequence: less leverage + less awareness

When a consumer used to see a new collection on their credit report, it triggered a predictable set of behaviors:

• “Wait—what is this?” (discovery)
• “Do I actually owe it?” (validation/dispute)
• “How do I fix this?” (resolution)

With under-$500 lines removed and a one-year delay on many unpaid accounts, that “credit report reminder” is no longer reliable—especially for the small balance accounts that dominate medical collections.

So, if your collection strategy implicitly depended on credit reporting to surface the debt, performance degradation isn’t a mystery. It’s math.

Why Avtal digital engagement is the replacement (and frankly, a far better one).

Credit reporting was never a great consumer experience. It was a blunt instrument that created urgency—sometimes before a consumer even understood the bill. Furthermore, it was a somewhat random tool, as many, if not most healthcare providers never furnished medical debt tradelines. Lastly, state and federal regulators never liked it. The CFPB’s rule may have been sued into submission, but it’s clear the policy makers at the state and federal level still don’t like the practice.

At this writing, 15 states currently have some form of ban on furnishing medical debt, with four more states contemplating it. Even if the Trump administration prevails in taking away the state’s rights to do this, it’s clear that policy makers are against the practice. Even Republican congressman Don Bacon of NE broke ranks and introduced the Reporting Medical Debt Payments as Positive Consumer Credit Information Act, effectively arguing that the current negative-only system is rigged. Said the congressman,

“Medical bills shouldn’t affect an individual’s credit score… I do not support individuals getting penalized for medical bills… Healthcare is one of the most unaffordable insurances for individuals.”

And don’t even get me started on my other concerns. See this piece I wrote while I was at the CFPB. Collectors who furnish, since they are not furnishing directly from the system of record (SOR), are highly exposed.

https://www.consumerfinance.gov/about-us/blog/debt-collectors-re-evaluate-medical-debt-furnishing-in-light-of-data-integrity-issues/

I wrote this piece as my warning to industry that agency owners face incredible risk when they furnish without direct and continuous access to the SOR.

As I said above credit reporting was a hugely imperfect tool for three main reasons:

1. Many if not most providers do not furnish, so there were enormous patient awareness gaps.
2. Furnishing often triggered an onslaught of repetitive direct and indirect disputes, and oftentimes CFPB complaints, from credit repair organizations, all requiring a great deal of cost to manage.
3. Besides the real costs of managing those disputes, they generated real compliance costs in terms of FCRA lawsuits and heighted federal and state regulator awareness of your agency and its practices.

Digital engagement can replace the “discovery” function in a way that’s faster, clearer, and more consumer-friendly—while still driving resolutions and very importantly dropping costs and decreasing risk.

Avtal’s digital engagement service can be positioned as the system that:

• Notifies consumers earlier and more gently (without waiting a year for bureau reporting),
• Explains the balance with clarity and clear calls to action
• Guides them to the right next step (pay, plan, financial assistance, dispute/validation),
• Documents every touchpoint for compliance and client reporting.

In short: if the credit report used to be the wake-up call, digital engagement becomes the structured, compliant conversation that gets the account resolved.

What “good” looks like in a post-credit-report medical collections world

1) Earlier, clearer outreach—without creating new risk

With the one-year delay, time-to-contact matters more. But “faster” can’t mean “sloppier.”
Your program needs:

• Channel strategy aligned to Regulation F, FDCPA, FCRA, and TCPA
• Consistent disclosures
• Controlled templates (not ad hoc improvisation)
• Audit-ready proof of what was sent, when, and why

(Yes, this is also how you reduce complaints and avoid unforced errors.)

2) Self-serve resolution options that don’t dead-end

Medical accounts have friction: insurance, coding confusion, EOB mismatches, hardship.
Digital engagement wins when the patient can:

• Understand the balance
• Choose a payment option that works for them
• Request validation / dispute / billing review
• Get routed correctly without repeating themselves five times
• Manage on their own timeline through a channel of their choosing

3) Better segmentation for under-$500 inventory

Since under-$500 accounts won’t appear on credit reports at all, you need a playbook that makes these balances economically viable:

• Low-cost digital-first contact across all small balances, not just the ones that lost access to furnishing
• Smart cadence based on engagement signals
• Fast exits when resolved / disputed / not collectible

4) Long-term, regular engagement and awareness without the compliance risk

Instead of hoping your consumer checked their credit report, Avtal creates a digital engagement relationship, so your consumers know just where they stand, how much they owe, and how to get in touch with you.

Compliance note (don’t bury this)

Digital engagement isn’t “more messages.” It’s better messages—delivered under your policies, your consent rules, and applicable law. (You’ll still want counsel/compliance to review templates and workflows.) Credit reporting was always a very negative first experience your consumers with your agency, fraught with compliance and legal risk.

Bottom line

The credit report used to do a lot of work for medical collections—especially on small balances. But that era is over: paid collections removed and waiting periods extended (July 1, 2022), and under-$500 tradelines removed (April 11, 2023).

If you want to recover what was lost, you need a scalable way to create awareness and resolution without relying on credit reporting.

That’s exactly what Avtal digital engagement is built to do.