On July 22, 2025, New Jersey’s Louisa Carman Medical Debt Relief Act (the “Act”) went into effect. The Act prohibits creditors and debt collectors from reporting medical debt to consumer reporting agencies for healthcare services provided on or after July 22, 2024. Any healthcare provider who is owed a medical debt from a patient is considered a medical creditor under the Act. Any entity who is considered a medical creditor must ensure they are complying with the Act’s requirements.
The Act regulates how medical debt is collected and billed and applies to unpaid charges for healthcare services, items, or prescription drugs provided by licensed providers in New Jersey. Monetary penalties may be levied for non-compliance.
Core Protections and Prohibitions
- Ban on Credit Reporting: Medical creditors and debt collectors are prohibited from reporting medical debt to consumer reporting agencies (e.g., Equifax, Experian, TransUnion) for services provided on or after July 22, 2024. Consumer agencies must exclude paid debts or those under $500 from reports, regardless of date. Any violative reporting is deemed void and must be deleted.
- Limits on Collection Actions: No collection efforts, including lawsuits or referrals to third-party collectors, can begin until 120 days after the initial bill and after offering a “reasonable payment plan.” Wage garnishment is outright banned for patients with incomes below 600% of the federal poverty level. Liens on primary residences and asset seizures are restricted for debts under $1,000.
- Interest and Fee Caps: Annual interest on medical debt is capped at 3%, with post-judgment interest following court rules but not exceeding this limit. Providers cannot add collection fees beyond the principal owed.
Requirements for Patient Communication and Relief
- Pre-Collection Notices: At least 30 days before any collection action (and 60 days in some cases), providers must send a detailed bill and notice in 14-point bold font, explaining the debt, patient rights, and that no credit reporting has occurred. This notice must also reference available financial assistance.
- Reasonable Payment Plans: A “reasonable payment plan” is defined as a plan that satisfies the following criteria: (i) monthly payment amounts set at a level that the patient can reasonably afford or no more than 3% of a patient’s monthly income, if known; (ii) a duration that allows the patient to repay the debt in full within a reasonable timeframe; (iii) the terms of the payment plan are documented in a written agreement provided to the patient; (iv) provisions for adjusting the payment amounts and duration in response to changes in the patient’s financial circumstances; (v) a grace period of at least 60 days for late payments; and (vi) charges an interest rate of not more than 3% per year.
- Screening and Appeals Protections: Providers are required to screen patients for financial hardship and refer them to charity care or state/federal programs before collections. No actions can proceed if an insurance appeal is pending; successful appeals trigger debt deletion from reports.
Billing and Collection Overhauls
Entities subject to the Act must ensure their internal billing and collections policies are compliant with the Act. Additionally, healthcare providers must ensure any collection agencies they contract with also comply with the Act.
Penalties
Failure to comply with the Act could result in civil penalties and recoupment of any funds collected in violation of the Act. Providers and debt collectors should expect to see enforcement of the Act from the New Jersey Attorney General’s Office, Division of Consumer Affairs (“DCA”). Specifically, complaining patients may lodge complaints with DCA, who may investigate matters further.
How Frier Levitt Can Help You Thrive Under the Act
Frier Levitt can assist providers and collectors in developing a compliant billing and collections policy or reviewing existing policies. If you need assistance or have questions, contact us to speak to one of our knowledgeable healthcare attorneys.
Frier Levitt provides strategic, industry-focused legal counsel tailored to your needs. Contact our team today to learn how we can help you.
