In a crucial move aimed at easing the financial burden on residents, New York Governor Kathy Hochul signed a bill into law on Wednesday, making the state the second, after Colorado, to prohibit credit agencies from collecting information about or reporting medical debt.
The legislation also extends to hospitals and healthcare providers, barring them from reporting such debt to credit agencies.
Governor Hochul Signs Bill in NYC
At the bill-signing ceremony in New York City, Governor Hochul, a Democrat, emphasized the crippling impact of medical debt on low-income earners, describing it as a vicious cycle that traps individuals in a cycle of financial hardship.
The new law, effective immediately, aims to alleviate the burden on New Yorkers faced with medical bills, preventing such debts from adversely affecting their credit scores.
The law, however, has some limitations. It only covers medical debt charged to a credit card if the card was specifically issued for health services. Additionally, it does not apply to out-of-state healthcare providers.
Read more: Biden Cancels India Trip Over Alleged Murder Plot On US Soil
Medical Debt Law Limits: Credit Card Coverage Insights
Governor Hochul stated, “No one should ever have to make a horrible choice between their physical health and their financial health.”
The legislation seeks to address the challenges individuals face when medical bills, often unexpected, impact their ability to secure housing, loans, or employment due to negative credit reports.
According to a study by the Urban Institute, a nonprofit research organization, over 740,000 New Yorkers had unpaid medical debt owed to collection agencies on their credit reports as of February 2022.
The study further highlighted disparities, indicating that communities of color in most regions of the state had higher rates of medical debt compared to predominantly white communities.
While this legislation is a significant step, it may not entirely prevent medical debt from affecting credit scores, particularly in cases involving credit card debt or services provided by out-of-state healthcare providers.
Advocates argue that credit reports, designed to measure financial responsibility, often fail to account for life’s unexpected challenges, such as illness or injury. Although three major US credit reporting companies agreed to stop counting unpaid medical debt under $500 earlier this year, critics contend that broader measures are necessary.
The federal Consumer Financial Protection Bureau is considering a nationwide measure to address medical debt reporting, aligning with the Biden administration’s efforts to minimize the impact of medical debt on individuals’ creditworthiness.
Despite objections from Republicans who deemed the legislation too broad, New York lawmakers approved the measure in June, underscoring the bipartisan recognition of the need to address the financial challenges posed by medical debt.
As the legislation takes effect, it signifies a crucial step toward fairer credit reporting practices and offers relief to those burdened by medical debt in the state. The story will continue to evolve as the federal Consumer Financial Protection Bureau progresses in its rulemaking process on a national level.
Read more: Georgia Election Workers Seek Answers: Will Rudy Giuliani Be Held Accountable?
