California Governor Gavin Newsom is currently considering a bill that would prevent credit agencies from reporting on medical debt. The proposal, known as Senate Bill 1061, was introduced by Senator Monique Limón and passed the Legislature on August 28.
The purpose of the bill is to protect Californians from the burdensome consequences of medical bills that they cannot afford to pay. It aims to remove medical debt from consumer credit reports and prevent it from being considered when determining an individual’s creditworthiness.
According to Senator Limón, this measure will improve the lives of millions of Californians who are dealing with past-due medical expenses. By removing medical debt from credit reports, it will increase their credit scores and provide them with better access to financial products, housing, and employment opportunities.
The senator also highlighted that consumers often have no choice but to incur debt for necessary medical services. They are unable to shop around for cheaper options due to limited choices or lack of information. Therefore, using medical debt as a factor in determining creditworthiness may not accurately reflect an individual’s ability or willingness to pay their obligations.
Furthermore, Senator Limón pointed out that low-income consumers, black and Latino communities, and young people are disproportionately affected by medical debt. These groups already face structural barriers in achieving financial well-being.
Supporters of the bill include Attorney General Rob Bonta, the California Low-Income Consumer Coalition advocacy group, and the California Nurses Association representing over 100,000 members. They argue that these blemishes on a credit report can have long-term negative effects on families’ financial stability by limiting access to mainstream credit options, housing opportunities, and even employment.
Opponents of the bill include America’s Physician Groups representing 360 physician groups and approximately 170k physicians; the California Association of Collectors advocating for the credit industry; and Consumer Data Industry Association representing credit bureaus. They argue that there is too much ambiguity in the text of the proposal which could negatively impact healthcare providers.
A clause in SB 1061 stating that any debts reported after July 1st would be voided has also raised concerns among opponents who believe it could lead other loan products being reclassified as medical debts improperly.
Governor Newsom has until September 30th to make a decision regarding this legislation. Health Access California urged him to approve SB 1061 in order to protect health consumers from having their credits ruined due to seeking necessary care.