California Governor Gavin Newsom yesterday signed a trio of bills that will significantly impact the credit and collection industry in the state. These new laws, set to take effect in 2025, will reshape how medical debt is reported, expand consumer protections, and alter the landscape for commercial debt collection.
The big picture: The three bills signed into law are:
SB 1061: Medical Debt Reporting Ban
- Prohibits medical debt from appearing on credit reports
- Aims to prevent medical debt from hindering access to housing, employment, and loans
- Aligns with a proposed CFPB rule on medical debt credit reporting
AB 2837: New Requirements for Wage Garnishments and Bank Levies
- Creates complex new service and execution requirements
- Will affect how creditors and collectors pursue judgments
SB 1286: Expansion of Rosenthal Fair Debt Collection Practices Act
- Extends consumer debt collection protections to certain commercial debts
- Applies to commercial debts up to $500,000
Zoom in: California becomes the eighth state to pass legislation that prohibits medical debt from either showing up on consumers’ credit reports or prohibits lenders from using medical debt in assessing the creditworthiness of consumers applying for credit. The states are following the lead of the Consumer Financial Protection Bureau, which is proceeding with a similar proposal.
What they’re saying: Sen. Monique Limón (D-Santa Barbara), author of SB 1061: “No Californian should be unable to secure housing, a loan, or even a job because they accessed necessary medical care.”
- Attorney General Rob Bonta: “California today chose to put a stop to this unnecessary and outdated practice [of reporting medical debt].”
