A new law in New York, which prohibits the furnishing of medical debt to a consumer reporting agency and could create compliance concerns for the debt collection industry, came into effect on Dec. 13. The text of the Fair Medical Debt Reporting Act (FMDRA) can be found here.
Approved by the New York legislature in June, the law prohibits the furnishing to a credit reporting agency of certain covered “medical debt,” which it defines as “health care services, products, or devices” provided by a hospital licensed under [New York law], a health care professional authorized under [New York law], or an ambulance service certified under [New York law].
The law requires that these entities include in any contract for the sale or collection of medical debt a provision that prohibits the purchaser or debt collector from reporting the medical debt.
The law also prohibits consumer reporting agencies from including covered medical debt in a consumer report or maintaining it in a consumer’s file.
While the FMDRA’s definition of “medical debt” covers “an obligation or alleged obligation of a consumer to pay any amount whatsoever related to the receipt of health care services, products, or devices” it does exclude “debt charged to a credit card unless the credit card is issued under an open-ended or closed-end plan offered specifically for the payment of health care services, products, or devices.”
The FMDRA provides that any medical debt furnished to a CRA in contravention of the law becomes void. Collecting on a “void” debt obviously creates potential liability under the federal Fair Debt Collection Practices Act and other state consumer protection laws.
The compliance concerns for the industry will be related to confirming that any medical debt being purchased or placed for collection has not been previously reported to a CRA by the medical service provider to prevent unintentional attempts to collect a debt considered void, as well as confirming that any credit card debt purchased or placed does not fall within the FMDRA’s definition of “medical debt” to prevent unintentional furnishing of information related to a medical debt.