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Proposed legislation would change how medical debt affects credit

For the over 43 million people who have medical debt on their credit reports, a new proposal could bring them some assistance. reports that five Democratic Senators have introduced a new piece of federal legislation that would offer Tennesseans some credit score relief.

The Medical Debt Relief Act would allow any paid-off or settled medical debts to be removed from people's credit reports. It would also require the three major credit reporting agencies to honor certain consumer protections that were part of a previous settlement, including waiting 180 days before adding a medical debt to a consumer's credit report.

The legislation takes into account the fact that medical debts differ from other types of debt. While people willingly opt to open credit cards and make purchases, people rarely choose to have costly medical issues that need attending to. If people have medical debt on their credit report, it can have a long standing effect on their financial well-being. A low credit score can prevent people from obtaining a loan, financing a vehicle or buying a home.

In addition, it often takes time for medical claims to be sorted out and determinations made as to what portions of the costs the consumer and the the insurance company are each liable for. According to the Association of Credit and Collection Professionals, the 180-day waiting period allows time for payments by insurance  companies to be applied before the debt shows up on the consumer's credit report.

Currently, the bill has been referred to the Senate Committee on Banking, Housing and Urban Affairs. The bill has also been introduced in the House of Representatives.

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