By Laura Waddell
On July 22, 2024, Governor Murphy signed the Louisa Carman Medical Debt Relief Act into law, which protects 1.5 million New Jersey residents from the most harmful aspects of medical debt like damage to credit scores, access to housing, jobs, and more. What does this mean for you?
Let’s break it down.
Impact on Credit Reports
One of the primary features of the law is the immediate prohibition of most medical debt from being reported to credit reporting agencies. Thanks to this Act, you won’t need to worry about your credit score being damaged because you got sick or injured. New Jerseyans will still owe medical debt under this new law, but it will help consumers maintain higher credit scores.
What also makes this law a landmark piece of legislation is the strong enforcement and notification requirements. Any medical debt amounts reported in violation of the law are required to be voided. Only two other states have passed this type of accountability measure. And our state is first in the nation to require consumer medical debt collection communications include notification of their enforcement protection, covered under this law, so nobody will pay unnecessarily. These provisions make our New Jersey law one of the strongest medical debt reporting prohibitions in America.
Interest and Wage Garnishments
Any person dealing with debt knows they don’t just pay for the debt owed, but also the interest attached to it. Fortunately, by July 2025, the Act will impose a limit to medical debt interest rates, capping them at 3%, making paying off medical debt more manageable for millions of New Jersey residents. And starting next summer, the law will also prohibit wage garnishments for medical debt for incomes up to 600 percent of the Federal Poverty Level, or $90,360 for an individual, and $187,200 for a family of four. Garnishments can be especially harmful for residents who are living paycheck to paycheck to make ends meet, and this will help protect the income of our most vulnerable residents.
The Future Outlook
Of course, no legislation is perfect, and we can do even more to protect New Jerseyans from the worst effects of medical debt. The first step starts with consumers like you.
While this law does prevent most medical debt from being reported, it does have a loophole; it does not include some medical credit card debt. Medical credit cards like CareCredit, offered by some providers to patients to help finance their out-of-pocket expenses for health care services, may not be included. Before you use medical credit cards for health services, check with your card companies and ask if your charged services will be covered under the Act.
Future state-level medical debt relief legislation should focus on resolving this loophole. And at the federal level, we should also advocate in support of the Consumer Financial Protection Bureau’s (CFPB) proposed rule that addresses medical debt on credit reports. Additionally, urge the CFPB to expand its proposed reporting ban to include all medical credit cards and close the “CareCredit” loophole.
Addressing medical debt takes a comprehensive approach. We can better protect consumers from medical debt by making health care more affordable and supporting proposed statewide legislation like S1971.
This bill will provide better value and cost to New Jersey’s health care ACA marketplace consumers who are over 200 percent of the Federal Poverty Level. We should also work to establish a diversion program to help resolve and keep medical debt out of the New Jersey court system and make educational resources available for those navigating litigation cases.
These are just some of the ways we are continuing to work to further protect people from the harmful aspects of medical debt. New Jersey Citizen Action and our allies will keep fighting to ensure that no one has their credit or finances ruined because they got sick or injured.
Get involved in our fight to make New Jersey a better place for everyone to live and work! Join our movement here.
And if you've been affected by medical debt and would like to join our advocacy efforts by sharing your story, click here.