New York joins Colorado in banning medical debt on consumer credit scores


New York has become the second US state to protect its residents' credit scores from being tarnished by unpaid medical bills.

New York Governor Kathy Hochul signed a bill prohibit credit reporting agencies such as Equifax, Experian and TransUnion from considering medical debt on consumers' credit reports. Colorado It also excludes medical debt from credit scores, except in certain circumstances.

“I am signing a bill that prohibits hospitals, health care providers and ambulances from reporting medical debt to their credit bureaus,” Hochul, a Democrat, said at the bill signing ceremony in New York City . “People can focus on getting healthier and not on whether or not someone is going to catch you and send you into an even bigger spiral, so that's what we're talking about.”

bad credit makes it more difficult to get a loan, buy a house or car, or get approved for a credit card. People with low credit scores also tend to pay more for home or auto insurance.

“Many New Yorkers are drowning in medical debt that can be difficult to pay, especially for those who may be struggling with a serious health problem,” Chuck Bell, advocacy program director at Consumer Reports, said in an email praising the bill. “This new law will ensure that New Yorkers don't have their credit ruined by medical bills that derail their budgets.”

On Your Side: Medical Debt and Your Credit Report 02:45

national crisis

Nearly 25% of Americans say they have overdue medical or dental bills they can't pay, according to a study. investigation by KFF Health News with NPR.

“Medical debt forces millions of Americans to cut back on food and other essentials, deplete retirement savings, and make other difficult sacrifices,” KFF said in its report. analysis.

While medical debt affects even high-income people and the insured, it has a disproportionate impact on communities of color and low-income people, according to KFF-NPR research. Nationally, 28% of blacks and 22% of Hispanic Americans have medical debt, compared to 17% of whites, according to the U.S. Census Bureau. data sample.

“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 it,” Hochul said.

A charity that eliminates medical debt 04:20

Hochul's actions come amid efforts by the Biden administration to address the issue. In September, officials said they planned to develop federal rules in 2024 that, if adopted, block credit reporting agencys to resort to medical debt.

Instead of federal protection, lawmakers in at least a dozen states have introduced legislation aimed at reducing the financial damage caused by medical debt. Some of those bills would prevent medical debt from sinking credit scores and create relief programs, while other proposals would protect personal property from collections for unpaid health care bills.

The credit reporting industry is also taking action as the issue draws increasing scrutiny from lawmakers. Equifax, Experian and TransUnion agreed last year remove most medical debt from credit reports. This year, companies have stopped including medical debt of less than $500.

A blow to healthcare providers?

While consumer advocates say more needs to be done, critics say that removing smaller medical bills from a person's credit report makes it more difficult for healthcare providers to collect payment.

“Historically, the risk that an unpaid medical bill of less than $500 could appear on a consumer's credit report incentivized the patient to pay the bill,” a California doctor argued in a class action lawsuit he filed. archived in August against the three credit agencies.

“Medical providers now have a more expensive path to collecting payment for unpaid medical bills, if it is feasible to do so,” the complaint adds.

Some Republican lawmakers fear that New York's new legislation could also have unintended consequences.

Republican Assemblyman Josh Jensen, who voted against the bill, said that while it is necessary to ensure that people are not financially burdened by emergency medical debt, the legislation is too broad and should not apply to care that does not be an emergency.

“There is concern that people may incur an amount of debt with no intention of repaying it, rather than the intended reasoning of the legislation to ensure that people who need that critical care can get it without worrying about the debt following them forever.” “. he said.

New York's law takes effect immediately. “No one should have to make a horrible decision between their physical health and their financial health,” Hochul said.

—With information from the Associated Press.

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