California lawmakers say medical debt shouldn't hurt credit scores

LOS ANGELES -- California lawmakers are working on a bill that promises to protect residents from having their credit rating affected by unpaid medical debt.

State Sen. Monique Limon introduced Senate Bill 1061 which aims to ban healthcare providers, collection agencies and credit reporting agencies from sharing a person's medical debt. Credit reporting agencies would also be prohibited from accepting or storing that kind of information.

"Medical debt is not a good indicator of credit worthiness or the ability to repay a debt," said California Attorney General Rob Bonta, who is supporting the bill. "An everyday Californian who's buried under a mountain of medical debt -- their ability to have a home, a car, a job and they're also perhaps not seeking medical treatment -- it doesn't need to be that way."

Consumer debt experts say medical debt is an outsized problem in the U.S. and especially in Southern California. A recent study found that residents of Los Angeles County alone carry more than $2.9 billion in medical debt.

"About one in 10 adults are estimated to hold medical debt and nationally there's over $220 billion in medical debt sitting on people's accounts," said Erin Duffy with USC's Schaeffer Center for Health Policy and Economics. "Credit scores are used when people are looking for a place to live, work and trying to finance things that they need, like cars... and medical debt is one large component of what could be on someone's credit report."

New York, Colorado and Minnesota have already passed similar laws designed to keep medical debt from ruining a person's credit score. Bonta says he's confident lawmakers will be able to pass the bill and have it take effect by the start of next year.