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Senators introduce bill to exclude medical debt from consumer credit histories

Jeff Merkley

Jeff Merkley

Sen. Jeff Merkley (D-Ore.) introduced legislation on Monday that would prohibit firms from factoring in unpaid or settled medical debt into consumer credit scores, which could affect as many as 75 million Americans.

“Oregonians shouldn’t have to pay more on their mortgage or their credit card simply because they had the bad luck to need medical care,” Merkley said. “Unforeseen accident or illness can happen to any one of us. We can’t change that fact, but we can change the law so that responsible working families aren’t hit with unfair credit reports for years after medical debt has been paid off.”

The legislation, known as the Medical Debt Responsibility Act, is co-sponsored by Sens. Dick Durbin (D-Ill.), Chuck Schumer (D-N.Y.), Tom Harkin (D-Iowa), Sherrod Brown (D-Ohio) Robert Menendez (D-N.J.) and Richard Blumenthal (D-Conn.).

Medical debt collections, at present, can have a significant impact on a consumer’s credit score for years after the debt has been settled or paid off, which can result in the rejection of a consumer’s application for credit or higher interest rates for mortgages, credit cards and small business loans.

Medical debt is different from other kinds of debt in that it is usually involuntary — consumers do not have a choice over whether to incur medical expenses or the cost of the medical treatment. Bills are first submitted to insurance companies, which can take a substantial amount of time to determine the amount actually owed by the consumer. Consumers are required to wait for the billing decision of the insurance company, which can take several months, and often do not know that they are delinquent on a medical bill until they are contacted by a collection agency.

“The unpredictable expense of medical debt should not confine consumers to a lifetime of bad credit,” Blumenthal said. “Penalizing consumers for repaid or settled medical debt is an unfair and unnecessary practice that must be stopped.”

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