People of Color in New York Would Particularly Benefit from Medical Debt Protections

Author: Emily Vaculik, Citizen Action of New York    

The COVID-19 pandemic has exacerbated the debt problems of many Americans but has had particularly bad impacts on those already struggling. Families devastated by the impacts of the virus often have to confront additional burdens — abusive debt collection tactics for their medical bills. Decades of discriminatory financial policies have led to a disproportionate amount of debt collection harassment in Black and Brown communities. In December 2019, The Urban Institute found that debt collection had affected 42% of Black consumers; but only 26% of white consumers. According to an article in the New York Amsterdam News, the largest portion of debt for communities of color comes from medical services and student loans (read the article here).

              A 2017 survey by the Consumer Financial Protection Bureau (CFPB) found that Black Americans are contacted by debt collectors at higher rates than white respondents: 44% of Black respondents reported being contacted about debt, while only 29% of whites were contacted. Even when income gap differences are accounted for, Black Americans are sued at higher rates: 45% of respondents living in communities of color faced debt collection litigation, while only 27% of similarly situated respondents in white communities were sued.

              On October 30, 2020, the CFPB released a regulatory revision for the enforcement of the Fair Debt Collection Practices Act, the federal law that prohibits debt collection companies from abusive, unfair or deceptive debt collection practices. The revision allows consumers to limit the amount of harassing phone calls from debt collectors by restricting how often debt collectors may contact affected consumers. While the revision was important, it did not do enough to remedy abusive debt collection practices – particularly for communities of color. Debt collectors have the ability to seize money and personal property in their pursuit of debt collection – devastating families economically and often impeding them from paying for their basic needs like food, clothing, housing and utilities. This has a particularly detrimental effect on Black and Brown communities trying to recover from their discriminatory exclusion from the financial mainstream.  

              New York should consider adopting stronger policies regarding debt regulation to protect consumers from harassing debt collection practices. One legislative proposal is the Patient Medical Debt Collection Protection Act (PMDPA), which particularly addresses medical debt – one of the main sources of debt for Black Americans. The PMDPA addresses several debt collection practices, including shortening the statute of limitations for collection of medical debt and lowering interest rates on medical debt. New York needs stronger protections to protect consumers, particularly Black and Brown consumers, from pervasive predatory debt collection practices.