California is poised to become the eighth state to ban medical debt from appearing on credit reports, pending Gov. Gavin Newsom’s signature. Both houses of the state legislature have passed SB 1061, although there were some amendments, to the disappointment of the bill’s sponsor, that changed how medical debt is defined under the proposal.
Details: SB 1061, which has been supported by California Attorney General Rob Bonta, passed the Assembly with a 58-9 vote and the Senate with a 31-8 vote. The bill was amended during the legislative process to align the definition of medical debt with the Consumer Financial Protection Bureau’s proposed rule.
Prohibitions under the bill:
- Consumer credit reporting agencies would be barred from including medical debt in credit reports.
- Lenders could not use medical debt as a negative factor when making credit decisions.
- Furnishing medical debt information to credit reporting agencies would be prohibited, with violators facing voided debts and penalties.
Implementation: The bill would take effect on January 1, 2025, and requires contracts created after July 1, 2025, to include terms adhering to these new requirements.
Definition changes: Recent amendments removed medical credit cards and specialty loans from the bill’s definition of medical debt, a win for collection operations, lenders, and others.
What they’re saying:
- California Attorney General Rob Bonta: “There is no need for medical debt to appear on credit reports. We know it is not a reliable indicator of financial risk.”
- Senator Monique Limón, who sponsored the bill: “It is time that California protects consumers from the disastrous effects of medical debt and signs SB 1061 into law.”
