As the result of the signing of a bill into law by New York Governor Kathy Hochul, medical debt will be automatically removed from credit reports. Attorney Tanya Hobson-Williams of Hobson-Williams, P.C. says the elimination of this debt will remove the burden experienced by lower-income individuals who may be looking to rent a house or an apartment, save up for a new car or find a job.
As of December 13, 2023, in New York State, any medical debt up to $500 cannot be included in any credit reports. New York is now the second state in the nation, after Colorado, to forbid credit reporting agencies from including these obligations when determining someone’s credit score. Exceptions include any medical debt incurred from using a credit card (unless the card was issued for health services only) and any arrears from out-of-state providers.
State legislators who introduced the bill argued that someone should not be punished with a bad credit score because they may have experienced an emergency medical episode, resulting in unexpected expenses. In addition, these marks on their credit reports have disproportionately affected people of color.
Opponents and supporters of the new law have found fault with it. Those opposed to the law said it is too broad and should only eliminate debt related to emergency care. Proponents of the law argued that the threshold is too low, citing a study from the Urban Institute showing that more than 740,000 New Yorkers had unpaid medical debt on their reports as of February 2022 and more than half of residents from the lowest-income communities had more than $500 in medical debt.
Ms. Hobson-Williams says this law will provide relief for lower-income individuals who have struggled to rebuild their credit. “Those in the lowest economic strata could not build back their credit, no matter how hard they tried, because a small amount of medical debt held them back,” she says. “By removing this barrier, these individuals will be considered creditworthy when looking at apartments, applying for a car loan, or seeking employment.”
