A Senate bill that aims to prevent medical debt from ruining people’s credit scores — and their lives — is poised to pass the Legislature.
Democrats and some Republicans in the House already approved Senate Bill 605, and on Wednesday, it’s up for a final vote in the Senate.
Medical debt plagues many Oregonians. A survey last November by the Oregon Values and Belief Center found that one-third of Oregonians have experienced it in the last two years, and 85% of them said it has a major impact on their lives.
The bill would bar hospitals, providers, medical credit card companies and others from reporting medical debt to credit reporting agencies, which calculate credit scores. Credit scores are meant to indicate whether someone will pay their debts. A low score can be devastating, leading to an inability to secure credit, higher interest rates, rejection by a landlord or even a potential employer.
But medical debt is not a good gauge of financial worthiness, experts say. The federal Consumer Financial Protection Bureau has found it is a poor predictor of consumer credit performance because it fundamentally differs from other types of debt.
“Just because you get sick or injured does not mean that you're financially irresponsible,” Rep. Nathan Sosa, a Hillsboro Democrat and a chief sponsor of the bill, told The Lund Report.
He said that many people suffer a stroke or heart attack or have an accident, like falling off a roof or ladder, and end up with unexpected debt that ripples through their financial situation and hampers them for years.
Removing medical debt from credit reports does not diminish their accuracy, the consumer agency said in a January letter filed with the Legislature supporting the bill.
But opponents, including a majority of Republican lawmakers and several national financial services companies, oppose the bill, saying it could create confusion and lead to debt not being paid.
The bill would cover debt on a wide range of expenses, from provider fees and medical services to equipment and medication. It excludes debt for elective cosmetic surgery but not reconstructive surgery following a mastectomy, for example, or after an accident, infection or disease.
It also would not be retroactive. Starting Jan. 1, medical debt incurred by Oregonians would not be reported to credit reporting agencies like Equifax, TransUnion and Experian. Old medical debt still would linger but eventually fall away: Credit reporting agencies typically rely on seven years of credit history to calculate scores.
Response to growing problem
The bill follows a growing awareness of the harms of medical debt in recent years across the country. The Consumer Financial Protection Bureau has estimated that 100 million Americans owe more than $220 billion in medical debt.
In Oregon, at least 60% of the Chapter 7 and 13 bankruptcy filings in 2019 involved medical debt, according to a report by OSPIRG, the consumer advocacy group. The average debt was $2,326, but 15% of those filers reported owing more than $10,000 each.
With several national news outlets regularly reporting on the burden of medical debt, agency officials have taken action. In 2022, one reporting company, VantageScore, eliminated medical debt from its credit scoring, and the following year, Equifax, Experian and TransUnion removed medical bills of $500 or less from credit reports.
Then in early January, the Consumer Financial Protection Bureau finalized a rule banning the inclusion of medical bills on credit reports and barring lenders from using medical debt in determining loans or credit. The rule was set to take effect in March, but a Texas lawsuit blocked it from taking effect, and now the Trump administration has joined litigation against the rule.
In its Jan. 28 letter to the Legislature, filed eight days after the inauguration, the protection bureau urged states to enact their own rules.
Several have done just that. They include California, Colorado, Connecticut, Illinois, Minnesota, New Jersey, New York, Rhode Island, Virginia and Washington state.
“Oregon would be following the trend of many other states who are recognizing that medical debt is not something that should be reported to a credit agency and follow people through the rest of their lives,” Sosa, the Hillsboro Democrat, said during a mid-May hearing on the bill in the House Committee On Commerce and Consumer Protection.
An association representing credit reporting agencies opposes state laws on the industry. The Consumer Data Industry Association said in written testimony on the bill that the industry is regulated by Congress and the Fair Credit Reporting Act has set the framework for credit reports. The association said suppressing medical debt creates inaccurate credit reports.
“Less reliable credit reports create uncertainty for lenders, which can lead to stricter lending practices, reduced credit availability or higher interest rates for consumers in Oregon.”
“Oregon would be following the trend of many other states who are recognizing that medical debt is not something that should be reported to a credit agency and follow people through the rest of their lives.”
Republican Rep. Virgile Osborne, R-Roseburg and vice-chair of the legislative committee, also expressed misgivings about the bill. He said he liked the general idea but that it would be unfair to businesses that needed a consumer’s complete credit history, like a car dealer deciding on a consumer loan. He also said it would let consumers off their hook for their medical expenses.
“It promotes the potential for abuse when there’s no penalty for a lack of responsibility,” Osborne said. “That is my only concern with this bill.”
Sosa — and Sen. WInsley Campos, D-Aloha and a chief sponsor of the bill — said the bill would not wipe out the debt.
“This bill is not about debt forgiveness, it is not erasing debt, it is about fairness.” Campos said. “It is about ensuring that a single medical crisis doesn't become a lifelong financial barrier.”
Bill collectors could still pursue collection — something that happened to Campos. She said that several years ago she ignored a confusing medical bill, figuring her insurance company would pay for it. She ended up getting served by a collections agency. Realizing the bill was legitimate, she paid it off.
She said that experience left an impression.
“The consequences here are still pretty real,” Campos said.
Osborne still voted against the bill in committee and on the House floor, as did 16 other Republicans. Ten Republicans also opposed it the first time it was up for a vote in the Senate.
But a handful of Republicans in both chambers, including Reps. Kevin Mannix of Salem, Cyrus Javadi of Tillamook, Darcey Edwards of St. Helens and Sens. Mike McLane of Powell Butte and Todd Nash of Enterprise, supported it.
The Senate votes again Wednesday to approve an amendment that specifies that medical debt includes sums paid by medical credit cards.
Sosa expects it to pass. If that happens, he said many vulnerable people would be helped.
“It's going to impact seniors, who do not have all of their medical expenses necessarily covered by Medicare.” Sosa said. “It is going to impact people who live in rural areas who are statistically more likely to have medical debt than folks who live in more urban areas. And I think it is going to have an impact on racial and ethnic minority groups who also statistically have higher levels of medical debt.”