California Blocks Medical Debt From Credit Reports

California Gov. Gavin Newsom signed 19 bills into law Tuesday related to consumer protection, credit reporting, subscription cancellation procedures, and hospital pricing, among other issues.
“Nobody wants to get ripped off, whether it’s a small subscription fee that’s seemingly impossible to cancel or massive medical debts which force families into financial ruin,” Newsom said. “We’re strengthening protections for Californians across the board and helping save consumers money.”
“No Californian should be unable to secure housing, a loan, or even a job because they accessed necessary medical care,” Limón said in a statement. “With this new law, California is stepping up to protect consumers impacted by the effects of medical debt.”
Rob Bonta, California’s attorney general, and dozens of organizations, including the California Nurses Association—which represents more than 100,000 members—and advocacy group California Low-Income Consumer Coalition, supported the bill.
Critics included America’s Physician Groups, representing 360 physician group and approximately 170,000 physicians; the California Association of Collectors, advocating for the credit and collections industry; and the Consumer Data Industry Association, representing the credit bureaus; among others.
“SB 1061 … would create major disruptions in the reporting, processing, and collection of various types of debts to the detriment of consumers, medical providers, and business community,” the Receivable Management Association, a California-based nonprofit group representing more than 600 companies, and the collectors’ association said in a statement quoted by a legislative analysis.
The law will take effect on July 1, 2025.
The bill was needed, according to the author, because auto-renewing subscription services are easier to sign up for than they are to cancel.
“At a time when too many in our community are struggling, unwanted subscription renewals can really add up,” Schiavo said in a statement. “California is setting a model for the nation on protecting consumers from unnecessary charges—giving them more control over their finances and helping to ensure fair business practices, providing a win for both consumers and small businesses.”
Proponents said the bill will help protect consumers by improving transparency.
“While automatic subscription renewals can offer some convenience, they far too often harm consumers and businesses,” the Consumer Federation of California wrote in a legislative analysis. “As it stands currently, many subscriptions are almost impossible to cancel without undertaking a Kafkaesque process that frustrates consumers to no end and does so to the direct financial benefit of corporations.”
A coalition of opponents representing technology and advertising associations said what they perceive as ambiguity in the law is concerning and that businesses will need time to implement the changes.
The law will apply to subscription contracts which begin, are amended, or extended beginning on July 1, 2025.
Two measures are focused on banking practices.
“These bills aim to protect lower-income Californians that are disproportionately impacted by financial fees that can push them deeper into financial hardship,” the governor’s office said in the release.
“Health care debt can have profound consequences that impact not just an individual’s financial security, but also their health,” the author said in a legislative analysis. “AB 2297 will shield a qualifying patient’s property from liens during the debt collection process, thereby helping to preserve their housing stability, and better clarify eligibility rules so that we can ensure more consistent compliance among hospitals.”
One organization critical of the bill said the new law could prove costly for healthcare providers.
“The bill still prohibits hospitals from considering some of the assets of Medicare patients—specifically, their 401K and IRA assets, no matter how large,” the California Hospital Association said in a legislative analysis. “[The association] recommends that this bill include language that allows hospitals to consider all assets for patients covered by federal health care programs, but only so long as federal law … requires.”
The author said the law will help clear confusion that exists when some consumers believe they are purchasing access in perpetuity when terms could change that cause them to no longer have access to the item.
“This lack of understanding has frequently led to consumer confusion and frustration when their purchased digital good disappears from their online library, sometimes with little to no warning,” Irwin said in a legislative analysis.
Other new laws include those regulating commercial debts, real estate law, and franchise brokers.
In addition to the bills signed Tuesday, Newsom also approved four other consumer-related measures earlier this year—including one that regulates warranty services for travel trailers and mobile homes, one regarding consumer refunds, one limiting security deposits on rental properties, and another pertaining to enforcement judgment exemptions.