NY Erases Medical Debt from Credit History: A Fresh Start for Financial Health

Governor Kathy Hochul signed a law in New York that removes unpaid medical bills from credit records.

New York removes medical debt from credit reports (Photo: Google)

New York Bans Medical Debt Impact on Credit Scores

Credit agencies, hospitals, and healthcare providers cannot collect or disclose medical debt in New York. New York became the second state to enact similar legislation after Colorado, with the CFPB exploring a nationwide version.

Democratic Governor Kathy Hochul underlined the detrimental impacts of medical debt on low-income individuals and said the measure will take effect immediately to eliminate the health-finance option. New York’s law reduces medical debt’s credit rating impact. It does not apply to credit card medical debt unless the card is for health services and excludes out-of-state providers.

Credit reports evaluate financial responsibility, but supporters claim they omit medical expenses. Despite its limitations, the law helps people with high medical bills that damage their credit, making it hard to rent, borrow, or work.

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High Medical Debt Impact in New York Sparks Legislative Action

As of February 2022, over 740,000 New Yorkers have medical debt reported to collection agencies, with the Urban Institute showing higher percentages in minority populations than white ones. Three major credit reporting agencies stopped monitoring unpaid medical bills under $500, but activists say it’s not enough.

Over half of medical creditors in New York’s poorest areas owed $500 or more, the poll revealed. State lawmakers passed this measure in June despite Republican concerns that it was overly broad. The Consumer Financial Protection Bureau started removing medical invoices from credit records as part of the Biden administration’s efforts to reduce medical debt’s impact.

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