A new California law kicked in earlier this year that keeps delinquent medical debt from appearing on a credit report. The federal government says this is not allowed.
At risk are the credit scores of millions of Americans who are behind on medical bills.
How did we get here?
Here’s a quick summary of what is a complicated chain of events.
January – The Consumer Financial Protection Bureau finalized a rule removing medical debt from credit reports. California also adopted a new law that month, accomplishing the same thing.
July – A federal judge blocked the federal rule.
Oct. 28 – The CFPB published an interpretive rule saying states do not have the authority to enact a law like California’s, and more than a dozen other states’.
However, the National Consumer Law Center says the new guidance is not legally binding.
“Quite frankly, states can do whatever they want; they don’t have to rely on a federal agency telling them they can or can’t do something,” said attorney Carla Sanchez-Adams.
What does it mean to you?
Well, in California, nothing really changes. At least for now.
The state law is still in effect and continues to prevent medical debt from popping up in credit reports.
However, should the state law get challenged in court and struck down, folks who are behind on medical bills could see a hefty drop in their credit scores, which can interfere with jobs, housing, or any type of financing that does credit checks.
NCLC believes medical debt has no place on credit reports because it’s simply not a good indicator of creditworthiness and financial responsibility.
“Many times, people who have medical debt are because they are seeking treatment for something that was unplanned, you know, an accident happened, you got a diagnosis that you cannot have predicted, and then, you know, you don’t actually know how much you’re being charged upfront,” Sanchez-Adams said.
If you’ve fallen behind on your medical bills, now might be a good time to find out exactly where you stand. Maybe come up with a manageable payment plan to get you back on track.
In California, you have rights and protections when it comes to facing collections — medical, or otherwise.