Understanding the Medical Debt Relief Act

The Medical Debt Relief Act is a bill that seeks to amend the Fair Credit Reporting Act and the Fair Debt Collection Practices Act. It aims to provide relief to consumers who are struggling with medical debt by establishing a one-year waiting period before medical debt is reported on a consumer's credit report and eliminating paid and settled medical debts from credit reports that have been paid or settled in full. It also seeks to provide a timetable for medical debt verification and increase the efficiency of credit markets with more perfect information. The main purpose of the Medical Debt Relief Act is to reduce the burden of medical debt on American families, particularly Black, Latino, and low-income households.

This is because medical debt can be just as burdensome as student debt, yet consumers with medical debts have fewer options for acquiring them and receive fewer benefits from them than college graduates. The VA has already taken steps to simplify medical debt forgiveness, although the details of this plan have yet to be finalized. Additionally, the three major credit reporting agencies have begun to treat medical debt differently by offering consumers a 180-day grace period before an unpaid medical bill appears on their credit report. The Medical Debt Relief Act would not eliminate medical debt, but it would reduce some of the consequences associated with it.

For example, it would help reduce the racial wealth gap, stimulate the economy, and provide more humane treatment to those whose health struggles are exacerbated by significant, unaffordable, and unpredictable out-of-pocket medical costs. The Act also seeks to ensure that medical debt payments do not exceed 7.5% of a consumer's monthly household income. This figure only reflects the medical debt that was reported before the start of the coronavirus pandemic. In Senator Van Hollen's home state of Maryland, the state legislature unanimously passed a bill to permanently stop aggressive medical debt collection practices.

This is an important step in providing relief to those struggling with medical debt.

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