New Jersey is set to become the latest state to enact a law prohibiting the reporting of medical debt on consumers’ credit reports as part of a broader package of steps that Gov. Phil Murphy has been seeking for more than two years.
What’s Happening: Among the provisions of the bill are:
- Credit Score Protection: The law prevents most medical debts from impacting credit scores, helping consumers avoid the financial pitfalls of lower credit ratings.
- Interest Rate Cap: A 3% interest rate cap on all medical debts.
- Wage Garnishment Prohibition: Low- and moderate-income workers are protected from wage garnishment due to medical debt.
- Transparency in Debt Payment Plans: The law mandates clearer terms for medical debt payment plans, ensuring consumers understand their obligations.
Medical debts placed on credit cards are not covered under the bill.
Of Note: The bill that will be signed into law is named after Louisa Carman, a staff member in Gov. Murphy’s Health Care Affordability Office who died in a car crash in late 2023.
- The bill would also earmark $10 million from the state’s budget to purchase and forgive medical debt owed by residents of New Jersey.
What He Said: “Right now in New Jersey, more than 1 in 10 of our neighbors has medical debt in collections,” Gov. Murphy said in his State of the State address in January. “That number is even higher in communities of color. And we know that when someone is saddled with medical debt, they are less likely to seek medical care because they worry about being harassed by predatory debt collectors who will garnish their wages or even seize their property.”
