Got medical debt? New state law Riccelli sponsored will protect Washington residents from impacts to credit score

OLYMPIA – Medical debt will no longer factor into determining someone’s credit score in Washington.

The change comes after legislation sponsored by Sen. Marcus Riccelli, D-Spokane, was signed into law by Gov. Bob Ferguson Tuesday, preventing collections agencies from sharing information on medical debt with credit agencies. The change, Riccelli said, will help protect Washingtonians facing unexpected costs.

Ferguson said Tuesday that while the bill will not eliminate medical debt, it will eliminate barriers caused by the debt and lessen its impact.

“We know that nobody wakes up and thinks that they’re going to end up in the emergency room,” Riccelli said Wednesday. “And yet, if their credit score is impacted because of medical debt, they can have challenges getting housing, jobs, etcetera.”

According to Riccelli, removing medical debt from credit score reporting could improve scores by an average of 20 points. In January, the Consumer Financial Protection Bureau finalized a similar rule that would have prevented medical debt from applying to credit scores, though the rule was scuttled by the new Trump administration.

The federal rule was expected to exempt an estimated $49 billion in medical debt from the credit reports of 15 million Americans.

“Medical debt is a huge, huge issue in our state, and all across the country,” Ferguson said Tuesday.

According to the Leukemia and Lymphoma Society, 60% of adults say they could not pay an unexpected $500 medical bill, while 30% of residents live in a household with medical debt.

“Medical debt isn’t a choice – it’s a consequence of rising health care costs,” said Adam Zarrin, director of state government affairs for the Leukemia and Lymphoma Society, in a prepared statement. “Thanks to Gov. Ferguson and Sen. Riccelli, thousands of Washingtonians can finally breathe easier, break free from crushing medical debt, and focus on their health and families.”

The bill was Riccelli’s second attempt at lessening the financial burden of medical debt. Riccelli took a more “aggressive” approach to the issue while in the House of Representatives, introducing legislation that would have prohibited the garnishment of wages to repay medical debt.

The proposal ultimately died in committee without a vote.

“I think we found the sweet spot,” Riccelli said.

Riccelli said he worked on the bill with the Washington State Hospital Association and debt collectors.

“Any of us can wake up and have a bad day. We’re doing everything right, we’re paying all of our bills, and this could really take a lot of working families in the wrong direction,” Riccelli said. “And we don’t want that to happen.”

The bill will take effect on July 27.