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New York governor signs ban on reporting medical debt to credit reporting agencies

Consumer Financial Protection Bureau is considering a similar nationwide ban 

ALBANY, NY – New York Governor Kathy Hochul signed a bill today prohibiting medical debt from being collected by credit reporting agencies or included in a consumer’s credit report.  Consumer Reports supported the Fair Medical Debt Reporting Act (A.6275A/S.4907A, sponsored by Assembly Member Amy Paulin and Senator Gustavo Rivera) as it was considered by state lawmakers this year and called on Governor Hochul to sign it into law.  New York joins Colorado as the second state to enact such a ban as the Consumer Financial Protection Bureau considers a similar measure to protect consumers nationwide.

“Many New Yorkers are drowning in medical debt that can be difficult to pay off, especially for those who may be struggling with a serious health challenge,” said Chuck Bell, advocacy program director for Consumer Reports. “This new law will ensure New Yorkers won’t see their credit ruined because of medical bills that bust their budgets. Americans across the country deserve the same protection so they can obtain the health care they need without fear of having their credit record unfairly damaged.”

The CFPB has noted that its research has shown that “medical billing data on a credit report is less predictive of future repayment than reporting on traditional credit obligations. Mistakes and inaccuracies are common and can be compounded by problems such as disputes over insurance payments or complex billing practices.”

An estimated 100 million Americans have medical debt and one in five have reported being contacted by a debt collector over an unpaid medical bill. According to the CFPB, twenty percent of Americans also have at least one medical debt collection item in their credit reports, and over half of collection items are for medical debts. The problem disproportionately affects people of color: 28 percent of Black and 22 percent of Hispanic people carry medical debt compared to 17 percent of whites.

A Community Services Society of New York survey found that 41 percent of New Yorkers have either appealed a medical bill or paid one they didn’t think they owed for fear of being sued or placed into collections. Another 38 percent avoided care or sacrificed other necessities because of the cost of health care. According to a national survey by the Kaiser Family Foundation, two-thirds of adults with medical debt said that they or a member of their household have put off getting needed medical care because of costs.

While the national credit reporting agencies have voluntarily agreed not to report medical debts under $500, many New Yorkers receive medical bills much higher than this threshold.  New York’s new law provides additional protections for New York, where health care bills can be higher than the national average and are subject to ongoing increases through inflation.