A new law will prevent medical debt from hurting the credit scores of hundreds of thousands of New Yorkers.
The legislation, signed Wednesday morning by Gov. Kathy Hochul, builds on the state’s recent efforts to alleviate the effects of unpaid medical bills. A law passed a year ago also keeps hospitals and doctors from garnishing wages or slapping liens on homes.
The Fair Medical Debt Reporting Act prohibits hospitals, doctor’s offices and ambulance corps from reporting medical debt to the nation’s credit bureaus. It also prohibits credit bureaus from storing or releasing information on medical debt.
Credit scores are supposed to provide a snapshot of a consumer’s financial responsibility. They are used by banks to consider loans, landlords to screen tenants and employers to make hiring decisions.
But medical debt isn’t like other debt, Hochul noted. It’s not something you can plan for.
“No one plans to go to the emergency room, no one plans to break their leg,” she said.
New York becomes the second state in the country -- after Colorado -- to prohibit the use of medical debt information by credit bureaus, said Elisabeth Benjamin, vice president of health initiatives for the Community Service Society of New York, which championed the legislation.
Medical debt is a problem that impacts an estimated 740,000 New York residents, according to a recent study by the Urban Institute.
The institute found that Syracuse had the worst rate of medical debt among the state’s big cities, affecting an estimated 25% of adults -- or about 30,000 people. This law would immediately require consumer credit bureaus to remove medical debt from their files.
The law does not hide all medical debt. That’s because people pay their medical bills with other methods, such as credit cards, second mortgages or other types of loans that aren’t listed as medical debt. Only credit cards issued for the specific purpose of paying medical bills must be excluded from consumer credit reports.
New York’s legislation is similar to rules proposed nationwide.
The federal Consumer Financial Protection Bureau has drafted up similar rules at the behest of the Biden administration that would bar medical debt from credit reports across the nation.
But those rules have not yet been adopted and could be changed by subsequent administrations, Benjamin said.
Staff writer Douglass Dowty can be reached at ddowty@syracuse.com or (315) 470-6070.