Senate Dems look to help consumers shake off medical debt from credit scores

A group of Senate Democrats is pushing legislation that would protect consumers from dings to their credit score brought on by paid off or settled medical debt.

Sen. Jeff Merkley (D-Ore.) introduced Monday a bill that would prevent credit agencies from taking into account any medical debt that has been paid off or otherwise addressed, arguing that complex and sometimes opaque medical bills can wreak havoc on a person's ability to line up an affordable loan for years.

"Unforeseen accident or illness can happen to any one of us," he said in a statement. "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.” 

Merkley is joined in backing the bill by Senate Majority Whip Dick Durbin (D-Ill.) and Sens. Charles Schumer (D-N.Y.), Tom Harkin (D-Iowa), Sherrod Brown (D-Ohio), Robert Menendez (D-N.J.) and Richard Blumenthal (D-Conn.).

The lawmakers argue that medical bills are often handled in such a way that consumers could become delinquent on payments through little wrongdoing of their own. The bills are first sent to insurance companies, where it can take a substantial amount of time to determine how much a consumer actually owes, and the complex and confusing process can sometimes leave consumers unaware they are delinquent on medical debt until they hear from a collection agency — and the damage to their credit score has already been done.

"All too often unresolved medical debt bills, including those stuck in insurance red tape through no fault of the consumer, are provided to credit reporting agencies with serious negative consequences for consumers," said Durbin. "This practice unfairly damages a consumer’s credit score for years after the debts have been paid in full."

The members also contend that medical debt is a poor predictor of a person's overall reliability and creditworthiness, given that medical costs are usually unexpected and impossible to avoid if they occur.

Under the bill, consumer credit agencies would be barred from considering medical debt in setting credit scores once the bill has been paid or settled. Furthermore, those agencies will be required to remove any medical debt from a consumer's record within 45 days of the debt being settled.

The bill was previously introduced in the last Congress, but languished in the Senate Banking Committee.

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