An Oregon Bill Could Insulate Credit Scores From the Bite of Medical Debt

Oregon lawmakers passed a bill that would shield credit reports from medical debt preventing debt collectors, hospitals and clinics from reporting unpaid medical bills to credit agencies.

Subprime lenders operating across multiple states may need to prepare for wider credit reporting reforms.

Medical debt, often a major component of poor credit in subprime applicants, will no longer signal financial distress in credit reports for Oregonians.

The bill traces its roots back to better understanding the cause of medical bills as being primarily emergencies, not responsibility.

A 2023 survey by the Oregon Values and Belief Center finds one-third of Oregonians owe medical bills, 85% of whom had major life effects.

Senate Bill 605, which won final approval in the Oregon Legislature June 9, does not cancel the debt but keeps hospitals and clinics, as well as issuers of medical credit cards, from reporting them to credit bureaus such as Experian, Equifax, and TransUnion. 

Consumer organizations and the Consumer Financial Protection Bureau were in favor of the legislation. The CFPB had ruled medical debt as unstable as a credit indicator and had approved a now-halted federal rule to remove it from credit scores.

The January 2025 final CFPB rule, legally challenged and enjoined before being implemented, had been approved by the CFPB ahead of time. The CFPB’s January letter encouraged states to act, and Oregon followed suit.

It argues the bill disproportionately helps minority and rural communities where consumers are more likely to owe medical debt statistically.

Sosa also believes it will help seniors with gaps in Medicare coverage. “This bill is not debt forgiveness. It is about fairness,” said Sen. Wlnsvey Campos.

Under the new legislation, treatment, equipment, and medication debt are covered, but discretionary, cosmetic treatments are reportable. Medical credit card debt, such as credit card debt used only as treatment payments, are accounted for, as well. General purpose credit cards used to pay for healthcare, however, are reportable.

Not everyone sees eye to eye. The Consumer Data Industry Association thinks the legislation makes credit reports less reliable. Less reliable credit reports increase lender uncertainty, the association wrote, and it may lead to more stringent lending or higher fees paid by borrowers.

Republican Rep. Virgile Osborne had similar concerns, saying the proposed legislation could prevent holding clients responsible: “It encourages possible abuse when you have no penalty for lack of responsibility.”

Some concerns surrounding the legislation are the possibility of less reliable credit reports and potential abuse.

Despite this, bipartisanship kept the bill moving through both chambers. A few Republicans, including Senators Mike McLane and Todd Nash, crossed party lines to vote for the bill which cleared the Senate with an 18-12 vote margin. It now goes to Gov. Tina Kotek’s desk for her signature.

The Oregon legislation follows a broader nationwide pattern. TransUnion, Equifax, and Experian had already removed debts under $500 related to medical bills from reports by 2023. VantageScore had done so beforehand too.

But with congressional momentum stuck in the courts, states like Oregon, New York, and Colorado are moving ahead on credit scoring themselves. This kind of change is potentially life-changing.

Medical bills strike without warning — and for individuals already struggling with debt, the result can be disastrous. The supporters’ argument follows this twofold train of thought: Pulling the burden off credit scores won’t be just about fairness; it could open doors to homes, credit, and employment for thousands of families. 

If SB 605 passes, it’ll be the second chance at economic security following illness or disability.