New Law in New York Prohibits Medical Debt from Appearing on Credit Reports

What to know

• Medical debt will no longer appear on New York residents’ credit reports.
• The change prohibits credit agencies from collecting information about medical debt or reporting it as part of consumer credit scores.
• The decision should help people facing huge, unexpected medical bills.

NEW YORK — Unpaid medical debt will no longer appear on New York residents’ credit reports, under a bill signed into law by Gov. Kathy Hochul on Wednesday.

The law prohibits credit agencies from collecting information or reporting medical debt. The law also prohibits the state’s hospitals and health care providers from reporting such debt to the agencies.

New York is the second state after Colorado to enact such a law. The federal Consumer Financial Protection Bureau is considering a similar measure nationwide.

“Medical debt is a vicious cycle. It really affects low-income people, but it forces them to remain low-income people because they will never be able to get out of that situation,” Hochul, a Democrat, said at the bill signing ceremony in New York City.

The new law will take effect immediately. “No one should have to make a horrible decision between their physical health and their financial health,” Hochul said.

The new law won’t necessarily prevent all medical debt from affecting New Yorkers’ credit scores. It will not apply to debt charged to a credit card unless the card was issued specifically for healthcare services, and it does not apply to out-of-state healthcare providers.

People facing large, sometimes unexpected medical bills may experience obstacles when it comes to renting a home, getting a car loan, or getting a new job due to a bad credit report. Credit reports are meant to measure how responsible a person is with their money, but they don’t take into account the unexpected realities of life, such as suffering from an illness or injury, supporters of the law argued.

More than 740,000 New Yorkers had unpaid medical debt to collection agencies on their credit reports in February 2022, according to a study by the Urban Institute, a nonprofit research organization. The study also found that in most regions of the state, communities of color had higher rates of medical debt than predominantly white communities.

Three major U.S. credit reporting companies agreed this year to stop counting unpaid medical debts under at least $500, but advocates have long said that’s not enough.

The study of Urban Institute found that in New York’s lowest-income communities, more than half of consumers with medical debt owed $500 or more.

State lawmakers passed the legislation in June despite Republican objections that the legislation is too broad and should not apply to non-emergency care.

The federal Consumer Financial Protection Bureau began its rulemaking process to remove medical bills from Americans’ credit reports in 2023. It’s part of the Biden administration’s long push to minimize the significance of medical debt in the form in which people’s solvency is measured.

2023-12-13 21:52:06
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