U.S. Senator Bob Menendez (D-N.J.) is co-sponsoring legislation aimed at protecting individuals and families from ruining their finances due to medical debt.
He noted there are people who reliably pay their bills and meet their debt obligations, yet their medical debt is causing financial problems, making it more challenging to buy a home, a car, get a credit card or find affordable financing.
"All the financial planning in the world can't prepare a family for a sudden medical emergency or an unforeseen illness, and the bills that come with them. That's why I have joined several senate colleagues in introducing the Medical Debt Relief Act to prevent medical debt from continuing to harm consumers' credit scores even after it has been paid off or settled," Sen. Menendez said in a prepared statement. "Responsible people should not be denied credit or forced to shell out more money in interest payments just because they got sick or injured. That's not fair. And we need to fix it."
Here are four things to know about the Medical Debt Relief Act.
1. Under the legislation, credit agencies would not be able to use paid-off or settled medical debt collections in assessing the creditworthiness of a consumer, regardless of whether the debt was paid off or settled by the consumer or by an insurance company, according to a news release.
2. The legislation would also bar credit agencies from using medical debt information until 180 days after the medical debt becomes delinquent. That gives consumers more time to straighten out billing errors or insurance company misunderstandings before they receive a delinquent mark on their credit report, according to a news release.
3. Under the legislation, debt collectors would have to notify consumers of the 180-day waiting period. Debt collectors would also have to tell consumers that they can communicate with an insurance company to determine coverage or apply for financial assistance to pay the debt.
4. Additionally, the Medical Debt Relief Act would require the removal of any paid or settled medical debt from a consumer's credit report within 45 days of the debt being fully paid or settled. Currently, consumers may have to wait for up to seven years for paid medical debt to be removed from their credit report, according to a news release.