Attorney General Bonta Continues Fight Against Medical Debt Reporting

Consumers’ financial future should not be ruined for seeking lifesaving care

OAKLAND — California Attorney General Rob Bonta today sent a letter to the Consumer Financial Protection Bureau (CFPB) in support of the Bureau’s Proposed Rule which would prohibit the reporting of medical debt on credit reports. The proposed rule is expected to provide desperately needed relief for millions of Americans burdened by unexpected or inaccurate medical bills. Earlier this year, Attorney General Bonta, Senator Monique Limón (D- Santa Barbara), and a coalition of prominent consumer advocacy organizations unveiled SB 1061, legislation seeking to protect consumers from having their credit ruined by prohibiting medical debt from being reported on credit reports.

“When someone is scared and in pain, the last thing they should think about is whether seeking care will take away their ability to buy a house or land a job. Unfortunately, this is the reality for many people today,” said Attorney General Bonta. “There is no need for medical debt to appear on credit reports as it is not a good predictor of repayment, and it pushes more and more people into a harmful debt cycle that is very difficult to escape. I thank the Consumer Financial Protection Bureau for their nationwide leadership on this issue and for proposing a rule that sets a floor for consumer protections and allows states to enact stronger protections for their residents.”

Credit reports are meant to gauge an individual’s ability to repay future debt. Medical debt is often unforeseen and not a reliable indicator of financial risk, yet it can unfairly prevent consumers from getting loans, renting an apartment, or getting a job. Millions of Californians are saddled with medical debt as a result of our broken healthcare system. Fifty-two percent of adults reported that in the last 12 months, they or a family member had delayed or postponed care due to cost, 36% had medical debt, and 27% had problems paying or could not pay their medical bills.

In the letter, Attorney General Bonta notes that medical debt impacts consumers regardless of payment method and proposes the definition of medical debt be expanded to include all forms of payments made to health care providers. For instance, individuals might not directly owe money to medical or dental care providers; they might have settled their bills by incurring different types of debt, such as paying their provider with a credit card. These forms of debt should also be included in the coverage of the rule. For example, many Californians who cannot pay for health care turn to credit cards they are unable to pay down. The share of consumers who put medical or dental bills on a credit card is growing, now accounting for 25% of Californians, up from 19% just one year ago. This number is even higher for historically marginalized groups.

The letter also addresses CFPB’s concerns about the feasibility of identifying medical debt owed to third-party lenders, such as credit cards, by explaining that these lenders already have systems in place to categorize types of debt, which could be used to identify medical debt.

Attorney General Bonta is committed to protecting the financial health of Californians, especially vulnerable populations. In April, Attorney General Bonta submitted a comment letter supporting the Consumer Financial Protection Bureau’s proposed overdraft fee rule which would close a regulatory loophole that enables banks to extract billions of dollars from consumers by charging overdraft fees without adequately disclosing basic credit terms. In February, Attorney General Bonta issued letters to small banks and credit unions warning that overdraft and returned deposited item fees may violate California’s Unfair Competition Law and the federal Consumer Financial Protection Act. California consumers paid an estimated $200 million in overdraft fees in 2022, with the financial burden disproportionately falling on low-income consumers and consumers of color.

A copy of the letter can be found here.