In 2025, the Consumer Financial Protection Bureau claimed federal law preempts state medical debt protections. But California’s statute remains in place.
Senate Bill 1061 (SB 1061) protects consumers from harmful medical collections and debt. Under California consumer rights, credit reporting agencies cannot include debt on a consumer’s report, and debt holders cannot report it.
Medical debt is money owed to hospitals, doctors, or clinics for healthcare services that insurance does not fully cover. Unlike credit card debt, medical debt usually starts from an unexpected emergency like a sudden illness or accident, or a necessary treatment.
When a negative medical debt credit report happens, the credit score impact can be severe. Medical debt makes it harder to rent a home, get a job, or finance a vehicle, or qualify for credit.
What the rule changes actually cover
Medical debt is a serious problem nationwide. Roughly 20 million people (1 in 12 adults) owe significant medical debt, with one in three paying off debt over time. Almost half of U.S. adults say they cannot pay an unexpected $500 medical bill out of pocket.
For Californians struggling with costs, credit reporting laws help prevent debt from spiraling. California’s SB 1061 provides stronger protections than those of the credit bureaus.
Since January 1, 2025:
- Companies cannot report your medical debt to credit agencies.
- Lenders cannot use your medical debt against you when you apply for a loan, job, or apartment.
Since July 1, 2025:
- Any new contract for medical debt must include a specific legal warning.
- If a provider omits this warning, your medical debt becomes void and you do not have to pay it.
- Hospitals must keep clear records of patient debt and debt collection lawsuits.
Equifax, Experian, and TransUnion all have more limited policies:
- Paid medical collections removal is automatic.
- Unpaid medical debt generally cannot be reported for one year.
- Medical debt under $500 is excluded from credit reports.
There are some exceptions, however. An unpaid medical bill of $500 or more may still appear after the one-year reporting timeline. California law generally prevents debt from appearing at all.
Neither SB 1601 nor the credit bureaus cancel debt or prevent lawful collection efforts. A healthcare provider or collection agency may still pursue payment even when debt is not included on a credit report.
Medical expenses paid by credit card are generally treated as credit card debt rather than medical debt. Financing plans offered specifically to pay for medical care also qualify as medical debt.
What to do if old medical debt is still showing
If medical debt appears on your report, file a dispute process with every credit reporting agency listing the account. Explain why the debt should not be reported and request that it be removed.
Next, review your credit reports regularly. Doing so can help you catch suspicious medical debt, reporting mistakes, or signs of identity theft.
You’re entitled to one free credit report yearly from the big three credit reporting companies. You can also call 1-877-322-8228 or visit AnnualCreditReport.com.
Lastly, know when to call an attorney. If the reporting agency or debt holder refuses to correct your account — or fails to properly investigate a dispute — it may be an FRCA violation. An experienced attorney can review the documentation needed to support your claim and determine if you’re entitled to compensation.