Colorado set pattern for national move to leave medical debt off credit reports

Colorado set pattern for move to leave medical debt off credit reports

A move Tuesday, in the last weeks of the Biden Administration means credit reporting agencies like TransUnion, Equifax and Experian will no longer be able to include unpaid medical bills on credit reports. At least for now.

CBS

The move is a duplicative one for Colorado residents after the passage of a first-in-the-nation law in 2023 barring the inclusion of medical debt on credit reports.

"I'm just starting to feel that like, 'wow, this is like, this is pretty amazing,'" said Western Slope resident Misty Castaneda. "I got to be part of something to help change a massive amount of everybody's lives."

Castaneda testified in front of the Colorado legislature in support of the idea when the bill was under consideration, revealing her own private nightmare. She also testified in Washington DC about the problems created by the reporting of medical debt to the credit check services.

She was born with a congenital heart defect called, Tetralogy of Fallot that affected her heart's structure.

"I had open heart surgery at 8 months old. I was told I wouldn't live past 13," she remembered. "Another one at 23 years old. And that was the one that was pretty catastrophic financially." 

It left her in $200,000 of debt. Married young, she lived under her husband's insurance and credit while she tried to make payments. The marriage turned abusive over the years says Castaneda, but she stayed because of her financial position longer than she might have otherwise. When she did leave, she credits Obamacare (the Affordable Care Act) for allowing her to get insurance regardless of her prior condition.

  Misty Castaneda CBS

"Then I had options," she said.

But the debt, along with a lack of a credit history, hung over her. It caused her trouble getting housing, a car, and a job.

"I was getting my license to be an insurance agent at the time. And for the agency itself, they were requiring background checks. So they pulled mine. I was in the interview process until they pulled it, and then they said, Thank you. No."

"The data shows that having medical debt is not an indication that someone is a poor credit risk," said Bethany Pray, chief legal and policy officer at the Colorado Center on Law and Policy, a non-profit that pushed for the change in Colorado. "Healthcare providers go after people and can garnish wages. There are a lot of steps they can take. having it appear on someone's credit report is a separate matter."

The center says there are frequent problems with medical debt reporting to credit agencies.

"Credit reports are often inaccurate," said Pray. "Medical debt that used to appear on someone's credit report might actually be related to a bill that you've paid. or it might be a duplicate bill."

The Consumer Financial Protection Bureau says the rule will remove $49 billion in medical debt from the credit reports of more than 15 million Americans. 

Banks have opposed the idea, claiming people may end up getting more credit than they can afford. Republicans in Congress have demanded that the Biden Administration cease issuing new rules so close to President-elect Donald Trump taking office.  Whether reversing the rule, set to take effect in the Spring is a priority for the Trump Administration, remains to be seen.

"No one should be denied economic opportunity because they got sick or experienced a medical emergency," said Vice President Kamala Harris. Medical debt is not sought like a loan or credit card noted Pray, who said there are still pathways for debt holders to collect.

"They have all these other tools available to them already for pursuing debt collection, and they do pursue them."

Castaneda has now restored her life and her financial situation is improving. Her heart condition she continues to deal with.

"It's been part of my life, I think, my whole life," she said. "I never had bills that I couldn't pay. I just couldn't pay my medical bills, you know. They were astronomical." 

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