New York Passes Bill Prohibiting Reporting of Medical Debt to Credit Bureaus

New York Legislature Passes Bill to Protect Individuals from Medical Debt Impact on Credit Reports

In a move aimed at safeguarding the financial health of individuals affected by illnesses and injuries, the New York legislature has passed a bill that prohibits health care providers from reporting medical debt to credit bureaus. If signed by Governor Kathy Hochul, the law would make New York the second state, after Colorado, to bar credit reporting agencies from collecting medical debts or including them in credit reports.

The goal of the bill is to limit the damage that medical debt can have on a person’s financial well-being. A bad credit report often leads to difficulties in renting a home, buying a car, or obtaining a loan. Unlike debts incurred due to reckless spending or bad investments, medical bills are often unexpected and arise from circumstances beyond an individual’s control.

Assemblywoman Amy Paulin, D-Brooklyn, emphasized the unique nature of medical debt, stating, “Medical debt is different from other debt. It’s spontaneous. It doesn’t reflect someone’s creditworthiness.” The legislation aims to address this distinction and provide additional protections for individuals burdened by medical debt.

While national credit reporting agencies have already voluntarily agreed not to report medical debt under $500, advocates argue that further safeguards are necessary. In at least a dozen states, lawmakers have introduced legislation to alleviate the financial burden of medical debt. Some proposals seek to prevent medical debt from lowering credit scores and establish medical debt relief programs, while others aim to protect personal property from collections.

Colorado currently has a law in place that prevents medical debt from being included on credit reports and credit scores, except in limited circumstances. The New York legislation, if enacted, would affect an estimated 740,000 adult New Yorkers and their families who currently have medical debt on their credit reports.

However, some Republican lawmakers express concerns about potential unintended consequences of the bill. Republican Assemblyman Josh Jensen, who voted against the legislation, believes that while it is necessary to prevent emergency medical debt from haunting individuals, the bill is too broad and should not apply to non-emergency healthcare. He raises concerns about the possibility of individuals incurring debt without intending to repay it.

Despite these concerns, the bill would take effect immediately upon Governor Hochul’s signature. Advocates for the legislation highlight the significant burden that medical debt places on many New Yorkers and emphasize the importance of protecting individuals’ access to healthcare services without fear of their credit records being unfairly impacted.

Chuck Bell, advocacy program director for nonprofit Consumer Reports, stated, “Medical debt is a serious problem that creates an overwhelming burden for many New Yorkers and unfairly undermines their financial security. This bill protects the right of New Yorkers to get the healthcare services they need without fear of unfairly ruining their credit records.”

What are the potential long-term consequences of medical debt appearing on credit reports?

To remove medical debts from credit reports after they are paid or settled, this bill would take the proactive step of preventing medical debt from appearing on credit reports at all. The legislation would provide immediate relief to individuals who may be struggling with medical expenses and prevent long-term consequences for their credit scores.

The bill also includes provisions to ensure that medical debts that are inaccurately reported to credit bureaus are promptly corrected. Health care providers would be required to provide notice to patients about their rights under the law and inform them if any medical debts will be reported to credit agencies. Additionally, individuals would have the right to appeal any inaccurately reported debts and have them removed from their credit reports.

The passage of this bill reflects a growing recognition of the financial challenges individuals face when dealing with medical expenses. Medical debt is a major contributor to bankruptcy filings in the United States, and many individuals are forced to make difficult choices between paying for necessary medical care and meeting their financial obligations.

By protecting individuals from the negative impact of medical debt on their credit reports, this legislation aims to alleviate some of the financial burden associated with healthcare expenses. It recognizes that medical debt is often unavoidable and should not be a barrier to financial stability.

If signed into law, this bill would position New York as a leader in protecting individuals from the harmful effects of medical debt on their credit reports. It sets an important precedent for other states to follow in ensuring that individuals are not unfairly penalized for medical expenses beyond their control.