Credit reports and scores

Colorado legislature approves removing medical debt from credit scores, reports | Legislature

The more than 700,000 Coloradans with medical debt may soon have that debt removed from their credit scores — thanks to a new bill passed by the state legislature. 

If enacted, House Bill 1126 would prohibit consumer reporting agencies in Colorado from including medical debt in credit reports through July 1, 2028. The bill would also require debt collectors to notify Coloradans that medical debt will no longer be included in credit reports. 

Lawmakers in the Senate approved the bill in a 22-10 vote on Friday, following the House’s 46-18 passage in February. Next, the bill will be sent back to the House to approve changes by the Senate, and then to the governor for final consideration. 

“Medical debt is not a measure of a person’s creditworthiness,” said bill sponsor Sen. Tony Exum, D-Colorado Springs. “This creates barriers for folks trying to access necessities like housing, utilities and loans, and it needs to change.” 

Proponents of the bill also argued that victims of medical emergencies should not be punished for accumulating debt since they often have no choice but to get medical care. They said medical debt does not indicate financial irresponsibility, such as debt accrued by voluntarily buying an overly expensive car or house. 

Opponents countered that while medical debt does not indicate financial irresponsibility, it can still indicate financial instability.

“It is still a financial liability. If you’re going to go and get a car loan, the bank or whatever institution you’re borrowing from needs to make sure that you have the capability to repay that debt,” said Rep. Lisa Frizell, R-Castle Rock, while voting against the bill. “We need to have some sort of level playing field for lenders, or else they’ll just simply stop lending.” 

Medical debt is the leading cause of bankruptcy nationwide. In Colorado, more than 12% of residents are in collections for medical debt, and the state’s combined medical debt totals $1.3 billion, according to a 2022 report from the federal Consumer Financial Protection Bureau.

Unpaid medical bills sent to collections are shared with consumer reporting agencies that generate credit scores and reports used by banks, landlords, employers and other companies. Exum said the negative impacts medical debt has on these credit scores and reports results in people being denied everything from business loans to insurance licenses to housing. 

In the Senate, no opponents spoke against the bill on the floor, but everyone who voted down the bill also voted down at least one of the two last-minute amendments made during the measure’s final reading. 

The amendments added the July 2028 expiration date and created a $200,000 study to consider the effects of the bill on a person’s creditworthiness, access to credit, medical debt burden and economic stability. Senate Majority Leader Dominick Moreno said the amendments were requested by the governor’s office.

The bill passed the legislature almost entirely along party lines, with all Democrats in both chambers voting “yes” and all but one Republican voting “no.” The Republican who supported the bill is Rep. Ron Weinberg, R-Loveland, who sponsored the measure in the House with Rep. Naquetta Ricks, D-Aurora. 

Weinberg said there is “no reason” for this debt to be on credit reports, pointing out that the debt incurred from the same medical procedures can fluctuate wildly. He spoke of residents being charged $100,000 by medical facilities, but negotiating down to only $5,000 by inquiring out each specific charge. 

“It’s absolutely ridiculous once it gets onto your consumer report,” Weinberg said. “This is a no brainer one for me.” 

The bill is expected to be sent to Gov. Jared Polis for final consideration in the coming weeks. If signed by the governor, the bill will go into effect in August. 

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