NEWARK, NJ – At a press conference today at Newark’s New Community Corporation, which offers free credit counseling, U.S. Senator Bob Menendez discussed legislation he is co-sponsoring to protect individuals and families from financial ruin caused by medical debt that too often results from an unforeseen illness or injury. The Consumer Financial Protection Bureau has found that credit reports of 43 million Americans are being dragged down because of medical debt, and some15 million American consumers have only medical debt and no other collection items on their credit reports. These are people who reliably pay their bills and meet their debt obligations, yet their medical debt is causing real financial harm, making it harder to buy a home, a car, get a credit card, or find affordable financing.

“All the financial planning in the world can’t prepare a family for a sudden medical emergency or an unforeseen illness, and the bills that come with them. That’s why I have joined several Senate colleagues in introducing the Medical Debt Relief Act to prevent medical debt from continuing to harm consumers’ credit scores even after it has been paid off or settled,” said Sen. Menendez. “Responsible people should not be denied credit or forced to shell out more money in interest payments just because they got sick or injured. That’s not fair. And we need to fix it.”

Arthur Lemise, a retired Ironworker from North Arlington, who lost part of his thumb in an accident and found himself mired in medical bills, shared his personal story. He said his first notification that a bill he never received went unpaid was a negative hit on his credit report and he then received subsequent calls from collections agents. As a result, he said interest on his car loan was increased by two percentage points and he was denied a credit card.

"Sen. Menendez’ bill – which gives consumers a 180-day window – would have made all the difference to me, and it will make all the difference for many others who find themselves overwhelmed with tons of bills, or even a bill they forgot to send, and see their credit damaged before they even can figure out what is going on,” said Mr. Lemise.

Mr. Lemise story is not unusual, Menendez said. Medical debt often results from an unpredictable accident or sudden illness where consumers can often be responsible for the whole bill – or bills -- until insurance works it out. Most patients don’t know how much various medical services cost in advance – especially in an emergency – and co-pays and deductibles can be confusing. As consumers figure out what they’ve been billed for, how much insurance will or won’t be covering, and other issues, they will typically delay paying medical obligations – resulting in unpaid debt appearing on their credit reports.

The Senator has been an original cosponsor of the Medical Debt Relief Act in the last three Congresses and, along with Sen. Jeff Merkley (D-Ore.), reintroduced the bill last month to reflect a major settlement between the New York Attorney General and the three nationwide consumer reporting agencies (Experian, TransUnion, and Equifax) that requires them to wait 180 days before adding any medical debt information to consumers’ credit reports, giving consumers time to clear up disputes with insurance companies and demonstrate need for financial assistance.

"The Medical Debt Relief Act will enable many more committed individuals and families to progress towards financial security by giving them the time to work on solutions and for us at New Community to work with them to keep them advancing towards self-sufficiency," New Community Corp. CEO Richard Rohrman said, noting the new Financial Opportunity Center opened in February at New Community. "Our clients can have no greater supporter than Sen. Bob Menendez.”

“I commend Senator Menendez for addressing one of the worst financial problems facing hard working families in New Jersey and across the nation, the financial fallout from debts related to illness and hospitalization,” said Beverly Brown Ruggia of N.J. Citizen Action. “This critically important legislation tackles a very serious form of economic and human rights injustice. Too many people get lost in debt simply because they get sick or have to care for loved ones who are sick.

The Medical Debt Relief Act would:

  • Prohibit credit agencies from using paid-off or settled medical debt collections in assessing a consumer’s creditworthiness, regardless of whether or not the debt was paid off or settled by the consumer or by an insurance company.
  • Prohibit credit agencies from using information related to a medical debt until 180 days after it becomes delinquent, giving consumers more time to straighten out billing errors or insurance company misunderstandings before they result in a delinquent mark on their credit report.
  • Require debt collectors to notify consumers of the 180-day waiting period and that the consumer can communicate with an insurance company to determine coverage or apply for financial assistance to pay the debt.
  • Require the removal of any paid or settled medical debt from a consumer’s credit report within 45 days of the debt being fully paid or settled. Currently, consumers may have to wait for up to seven years for paid medical debt to be removed from their credit report.

The Medical Debt Relief Act is supported by a large coalition of organizations, including: Consumers Union, Consumer Federation of America, Americans for Financial Reform, Cancer Support Community, The Leukemia & Lymphoma Society, Demos, National Association of Mortgage Brokers, the National Alliance on Mental Illness, and the National Credit Reporting Association, among others.

The Affordable Care Act includes two provisions Sen. Menendez fought for specifically to address the more than 60 percent of personal bankruptcies as a result of medical bills: 1) ensuring all emergency care is treated as “in-network” to avoid any high “out-of-network” costs, which he authored; and 2) requiring that insurance company caps total annual individual or family out-of-pocket costs.

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