California’s legislature has passed a bill aimed at protecting consumers from having their medical debts reported to credit agencies. Senate Bill 1061, sponsored by State Senator Monique Limón (D-Santa Barbara) with support from California Attorney General Rob Bonta, has cleared both the Assembly and Senate, making it eligible for approval by Governor Gavin Newsom.
Legislative Approval and Key Provisions
Senate Bill 1061 was approved with significant margins—58-9 in the Assembly and 31-8 in the Senate. The bill includes several amendments and defines medical debt in line with the Consumer Financial Protection Bureau’s proposed rule under the federal Fair Credit Reporting Act.
The bill’s provisions include:
- Prohibition on Medical Debt Reporting: Consumer credit reporting agencies and investigative consumer reporting agencies are barred from including medical debt in consumer credit reports.
- Credit Decision Protection: Entities using consumer credit reports cannot consider medical debt as a negative factor when making credit decisions.
- Restrictions on Reporting Medical Debt: Furnishing information about medical debt to a credit reporting agency is prohibited. Violating this provision makes the debt void and unenforceable.
- Contractual Requirements: Medical debt contracts entered into on or after July 1, 2025, must include terms reflecting these requirements. Violations by licensed or permitted individuals are considered violations of the governing law for those licenses or permits.
Amendments to Collection Processes
The bill also includes amendments to Section 10112.75 of the Insurance Code, specifically addressing collection processes. If a health insurer sends payment directly to the insured instead of the provider, the insurer must notify both parties. If the insured fails to forward the payment to the provider within 60 days, or within one year of the initial billing, the unpaid amount may be reported as medical debt to a credit reporting agency.
The amendment outlines actions that may be taken if the insured does not pay the provider, including:
- The bill may be sent to collections, and the insured could face collections or litigation.
- The insurer’s share of the cost could be reported as medical debt if certain conditions are met.
Next Steps
California’s legislative session ends on August 31, 2024, marking the final day for the Senate and Assembly to pass bills. Governor Gavin Newsom has until September 30, 2024, to sign or veto the bill. If signed into law, the bill would offer significant protections to consumers, ensuring that medical debt does not unfairly impact their credit reports.
Author: Jennifer Evancic
Jennifer.Evancic@ResourceManagement.com
Jennifer Evancic is a third-party auditor valued by creditors and large organizations for her knowledge in call monitoring within the collections industry. With meticulous attention to detail and a firm grasp of regulatory requirements, she ensures compliance with clients’ criteria and state and federal regulations.
Jennifer audits collections calls, ensuring they meet client-specific criteria and comply with regulations, providing valuable insights and maintaining industry standards.
Beyond her auditing responsibilities, Jennifer takes the lead in organizing and facilitating monthly call calibrations. These sessions serve as a collaborative forum where clients and their vendors come together to discuss call monitoring results and address any findings or areas for improvement. Jennifer’s guidance fosters open communication and ensures alignment between clients and vendors, driving continuous improvement in collections practices.
Jennifer stays up-to-date with compliance and industry best practices by participating regularly in peer meetings, regulatory updates and industry webinars. This keeps her informed about emerging issues and ensures she remains a knowledgeable leader in collections compliance.
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