The recently passed Fair Medical Debt Reporting Act in New York State, effective December 13, 2023, introduces vital protections for consumers burdened by medical debt impacting their credit ratings. This blog post delves into the Act’s specifics, including its influence on credit scores and the implications for New Yorkers.
What is the Fair Medical Debt Reporting Act?
Recently, the New York governor signed the Fair Medical Debt Reporting Act, also known as S4907A, into law. This new legislation is designed to safeguard consumers from unjust reporting of medical debt on their credit reports. According to the Act, credit reporting agencies are not allowed to include medical debt in consumer credit reports. Additionally, hospitals, healthcare professionals, and ambulances are explicitly barred from reporting medical debt to national credit agencies. The Act defines medical debt as any amount owed or claimed by a consumer for health care services, products, or devices provided by these entities. It’s worth noting that medical debts charged to a credit card are not considered obligations unless the card is specifically used for healthcare expenses under an open-ended or closed-end plan. Moreover, medical debt cannot be reported until it is at least 180 days past due. Once the debt has been paid or settled, it must be removed from credit reports.
In response to challenges like those indicated by a Community Services Society of New York survey, where 41% of respondents faced legal fears over medical bills, the Act aims to safeguard consumers against unfair credit reporting practices. According to the CFPB, 17.8% to 35% of American adults have unpaid medical bills.
Impact on Consumer Credit Reports
The Act’s direct impact on consumer credit reports is significant, especially considering the disproportionate effect of medical debt on credit scores across America – affecting about twenty percent of Americans, with over half of the collection items on credit reports relating to medical debts.
Defining Medical Debt Under the Act
In addressing medical debt, the Act also acknowledges and tackles racial disparities, where 28% of Black and 22% of Hispanic individuals are more likely to carry medical debt compared to 17% of whites. The Fair Medical Debt Reporting Act provides a clear definition of medical debt for reporting purposes, outlining the types of healthcare services, products, and devices included in medical debt reporting. It ensures unpaid medical bills are accurately categorized under the new law, addressing racial disparities in debt.
The Role of Health Care Providers
Under S.4907A/A.6275A, healthcare providers, including hospitals and ambulances, face new mandates to report medical debt data accurately and transparently, playing a pivotal role in ensuring fair medical debt reporting. This new law imposes fresh obligations on healthcare providers concerning medical billing data, requiring accurate and transparent reporting. The Act underscores the role of healthcare providers in ensuring fair medical debt reporting practices, aiming to enhance the accuracy of medical billing data while emphasizing the responsibilities of health care professionals in compliance.
The Role of Credit Cards in Medical Debt
The Act significantly influences how credit card charges for healthcare expenses are reported, marking a shift in protecting consumers from aggressive medical debt collection practices.
Key Takeaways from the Fair Medical Debt Reporting Act
The Fair Medical Debt Reporting Act, spearheaded by New York State Senator Gustavo Rivera and Assembly Member Amy Paulin, aims to secure the financial security of consumers by reforming medical debt reporting. It holds healthcare providers accountable for accurately reporting medical debt data and prohibits them from reporting to credit agencies. This will ensure fair and transparent reporting, ultimately easing the burden of medical care costs on consumers. Ultimately, the Act aims to alleviate the financial stress of medical debt on consumers, promoting more transparent and fair debt reporting practices.
Frequently Asked Questions
How long do unpaid medical bills stay on your credit report?
Your credit report can be affected by unpaid medical bills for a duration of seven years. According to the Fair Medical Debt Reporting Act, there is a requirement to wait for 180 days before reporting medical debt to credit bureaus. It is important to resolve any issues or disagreements with medical providers or insurers promptly in order to avoid any negative impact on your credit score. Additionally, paying off medical debt gradually may have a positive effect on your credit score.
Who enforces the Fair Medical Debt Reporting Act?
The Fair Medical Debt Reporting Act is enforced by the Consumer Financial Protection Bureau (CFPB), a government agency responsible for protecting consumers in the financial marketplace. The CFPB ensures that medical debt reporting is fair and accurate, and takes action against any violations of the act.
In conclusion, the Fair Medical Debt Reporting Act, enforced by the CFPB, marks a significant step towards fairer medical debt reporting. It not only protects consumers’ credit scores from undue harm caused by medical debts but also mandates healthcare providers and credit companies to adhere to stricter reporting standards.