Despite a Friday federal court ruling, striking down a Biden-era rule that barred lenders from considering medical debt when evaluating credit applications, Connecticut residents remain protected under a 2024 state law that prohibits the practice.
The ruling by U.S. District Judge Sean Jordan means Americans who suffered medical issues and had to take on debt will face additional hurdles when buying a car or a home, renting an apartment or taking out student loans.
But Connecticut residents can still breathe easy. In 2024, the General Assembly passed legislation that would prohibit considering medical debt in a borrower’s credit report. In fact, the federal ruling established by the Consumer Financial Protection Bureau (CFPB) in the last days of the Biden administration incorporated language from the Connecticut law passed by state Sen. Matt Lesser, co-chair of the Human Services Committee.
The Connecticut legislation passed with the support of the Biden-Harris Administration’s Consumer Financial Protection Bureau, the Connecticut Hospital Association and a wide array of consumer advocates and went into effect on July 1, 2024.
This week, Lesser said the court ruling by a Trump-appointed judge had put the interests of debt collectors ahead of the American people.
“This at the same time that President Trump has blown up the CFPB, which was designed to protect the American people from scam artists and financial predators, slashed the Medicaid program and food stamps, and dramatically increased the cost of borrowing for anyone with student loans,” Lesser said. “The good news is that Connecticut residents are protected from this specific ruling, thanks to 2024’s Senate Bill 395.”
In 2014, the CFPB published a report that found that medical debt was not an accurate indicator of a person’s credit worthiness. Their report states, “a large portion of consumers with medical debts in collections show no other evidence of financial distress and are consumers who ordinarily pay their other financial obligations on time.”
Medical debt is not the result of poor financial planning or consumer spending, it is often a one-time emergency cost. According to the Kaiser Family Foundation, in 2023, 9.5% of Americans or 25.3 million people ages 0 to 64 were uninsured.
