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<ns0:ActionText>INTRODUCED</ns0:ActionText>
<ns0:ActionDate>2026-02-20</ns0:ActionDate>
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<ns0:SessionYear>2025</ns0:SessionYear>
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<ns0:AuthorText authorType="LEAD_AUTHOR">Introduced by Assembly Member Schiavo</ns0:AuthorText>
<ns0:AuthorText authorType="COAUTHOR_ORIGINATING">(Coauthor: Assembly Member Harabedian)</ns0:AuthorText>
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<ns0:Legislator>
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<ns0:Name>Schiavo</ns0:Name>
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<ns0:Title> An act to amend Section 1785.3 of the Civil Code, relating to consumer debt. </ns0:Title>
<ns0:RelatingClause>consumer debt</ns0:RelatingClause>
<ns0:GeneralSubject>
<ns0:Subject>Consumer debt: medical debt.</ns0:Subject>
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<html:p>Existing law, the Consumer Credit Reporting Agencies Act, defines and regulates consumer credit reports and consumer credit reporting agencies. Existing law regulates the treatment of medical debt in this regard by, among other things, prohibiting a consumer credit reporting agency from making any consumer credit report containing medical debt information, prohibiting a person who uses a consumer credit report in connection with a credit transaction from using medical debt as a negative factor when making a credit decision, and prohibiting a person from furnishing information regarding a medical debt to a consumer credit reporting agency. Existing law makes a violation of certain provisions related to medical debt by a person holding a license or permit issued by the state to be deemed a violation of the law governing that license or permit.</html:p>
<html:p>Existing law, the Investigative Consumer Reporting Agencies Act, defines and regulates investigative consumer reports and investigative consumer reporting agencies. Existing law prohibits an investigative consumer reporting agency from making or furnishing any investigative consumer report containing specified items of information, including medical debt.</html:p>
<html:p>Existing law defines “medical debt” for the purposes of the Consumer Credit Reporting Agencies Act and the Investigative Consumer Reporting Agencies Act as a debt owed by a consumer to a person whose primary business is providing medical services, products, or devices, or to the person’s agent or assignee, for the provision of medical services, products, or devices, as specified.</html:p>
<html:p>This bill would, instead, define “medical debt” for these purposes as a debt related to, in whole or in part, a transaction, account, or balance arising from a
medical service, product, or device, except as provided. By changing the scope of what is considered medical debt, and because certain violations of the Consumer Credit Reporting Agencies Act are deemed a violation of a licensing statute and the violation of some licensing statutes is a crime, this bill would impose a state-mandated local program.</html:p>
<html:p>The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.</html:p>
<html:p>This bill would provide that no reimbursement is required by this act for a specified reason.</html:p>
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<ns0:Preamble>The people of the State of California do enact as follows:</ns0:Preamble>
<ns0:BillSection id="id_BE4CF847-6530-484D-BDC2-71E695FB1A03">
<ns0:Num>SECTION 1.</ns0:Num>
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Section 1785.3 of the
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is amended to read:
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<ns0:Num>1785.3.</ns0:Num>
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<html:p>The following terms as used in this title have the meaning expressed in this section:</html:p>
<html:p>
(a)
<html:span class="EnSpace"/>
“Adverse action” means a denial or revocation of credit, a change in the terms of an existing credit arrangement which is adverse to the interests of the consumer, or a refusal to grant credit in substantially the amount or on substantially the terms requested. “Adverse action” includes all of the following:
</html:p>
<html:p>
(1)
<html:span class="EnSpace"/>
Any denial of, increase in any charge for, or reduction in the amount of, insurance for personal, family, or household purposes made in connection with the underwriting of insurance.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
Any denial of employment or any other decision made for employment purposes
which adversely affects any current or prospective employee.
</html:p>
<html:p>
(3)
<html:span class="EnSpace"/>
Any action taken, or determination made, with respect to a consumer (A) for an application for an extension of credit, or an application for the hiring of a dwelling unit, and (B) that is adverse to the interests of the consumer.
</html:p>
<html:p>“Adverse action” does not include (A) a refusal to extend additional credit to a consumer under an existing credit arrangement if (i) the applicant is delinquent or otherwise in default under that credit arrangement or (ii) the additional credit would exceed a credit limit previously established for the consumer or (B) a refusal or failure to authorize an account transaction at a point of sale.</html:p>
<html:p>
(b)
<html:span class="EnSpace"/>
“Consumer” means a natural individual.
</html:p>
<html:p>
(c)
<html:span class="EnSpace"/>
“Consumer credit report” means any written,
oral, or other communication of any information by a consumer credit reporting agency bearing on a consumer’s credit worthiness, credit standing, or credit capacity, which is used or is expected to be used, or collected in whole or in part, for the purpose of serving as a factor in establishing the consumer’s eligibility for: (1) credit to be used primarily for personal, family, or household purposes, or (2) employment purposes, or (3) hiring of a dwelling unit, as defined in subdivision (c) of Section 1940, or (4) other purposes authorized in Section 1785.11.
</html:p>
<html:p>The term does not include (1) any report containing information solely as to transactions or experiences between the consumer and the person making the report, (2) any communication of that information or information from a credit application by a consumer that is internal within the organization that is the person making the report or that is made to an entity owned by, or affiliated by corporate control
with, that person; provided that the consumer is informed by means of a clear and conspicuous written disclosure that information contained in the credit application may be provided to these persons; however, where a credit application is taken by telephone, disclosure shall initially be given orally at the time the application is taken, and a clear and conspicuous written disclosure shall be made to the consumer in the first written communication to that consumer after the application is taken, (3) any authorization or approval of a specific extension of credit directly or indirectly by the issuer of a credit card or similar device, (4) any report by a person conveying a decision whether to make a specific extension of credit directly or indirectly to a consumer in response to a request by a third party, if the third party advises the consumer of the name and address of the person to whom the request was made and the person makes the disclosures to the consumer required under Section 1785.20, (5) any report
containing information solely on a consumer’s character, general reputation, personal characteristics, or mode of living which is obtained through personal interviews with neighbors, friends, or associates of the consumer reported on, or others with whom the consumer is acquainted or who may have knowledge concerning those items of information, (6) any communication about a consumer in connection with a credit transaction which is not initiated by the consumer, between persons who are affiliated (as defined in Section 150 of the Corporations Code) by common ownership or common corporate control (as defined by Section 160 of the Corporations Code), if either of those persons has complied with paragraph (2) of subdivision (b) of Section 1785.20.1 with respect to a prequalifying report from which the information communicated is taken and provided the consumer has consented to the provision and use of the prequalifying report in writing, or (7) any consumer credit report furnished for use in connection with a
transaction which consists of an extension of credit to be used solely for a commercial purpose.</html:p>
<html:p>
(d)
<html:span class="EnSpace"/>
“Consumer credit reporting agency” means any person who, for monetary fees, dues, or on a cooperative nonprofit basis, regularly engages in whole or in part in the business of assembling or evaluating consumer credit information or other information on consumers for the purpose of furnishing consumer credit reports to third parties, but does not include any governmental agency whose records are maintained primarily for traffic safety, law enforcement, or licensing purposes.
</html:p>
<html:p>
(e)
<html:span class="EnSpace"/>
“Credit transaction that is not initiated by the consumer” does not include the use of a consumer credit report by an assignee for collection or by a person with which the consumer has an account for purposes of (1) reviewing the account or (2) collecting the account. For purposes of this subdivision,
“reviewing the account” includes activities related to account maintenance and monitoring, credit line increases, and account upgrades and enhancements.
</html:p>
<html:p>
(f)
<html:span class="EnSpace"/>
“Employment purposes,” when used in connection with a consumer credit report, means a report used for the purpose of evaluating a consumer for employment, promotion, reassignment, or retention as an employee.
</html:p>
<html:p>
(g)
<html:span class="EnSpace"/>
“File,” when used in connection with information on any consumer, means all of the information on that consumer recorded and retained by a consumer credit reporting agency, regardless of how the information is stored.
</html:p>
<html:p>
(h)
<html:span class="EnSpace"/>
“Firm offer of credit” means any offer of credit to a consumer that will be honored if, based on information in a consumer credit report on the consumer and other information bearing on the creditworthiness of the consumer, the consumer
is determined to meet the criteria used to select the consumer for the offer and the consumer is able to provide any real property collateral specified in the offer. For purposes of this subdivision, the phrase “other information bearing on the creditworthiness of the consumer” means information that the person making the offer is permitted to consider pursuant to any rule, regulation, or formal written policy statement relating to the federal Fair Credit Reporting Act, as amended (15 U.S.C. Sec. 1681 et seq.), promulgated by the Federal Trade Commission or any federal bank regulatory agency.
</html:p>
<html:p>
(i)
<html:span class="EnSpace"/>
“Item of information” means any of one or more informative entries in a credit report which causes a creditor to deny credit to an applicant or increase the cost of credit to an applicant or deny an applicant a checking account with a bank or other financial institution.
</html:p>
<html:p>
(j)
<html:span class="EnSpace"/>
(1)
<html:span class="EnSpace"/>
“Medical debt” means a debt related to, in whole or in part, a transaction, account, or balance arising from a medical service, product, or device.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
“Medical debt” does not include any of the following:
</html:p>
<html:p>
(A)
<html:span class="EnSpace"/>
Debt charged to a credit card unless either of the following applies:
</html:p>
<html:p>
(i)
<html:span class="EnSpace"/>
The credit card is issued under an open-end or closed-end plan offered specifically for the payment of medical services, products, or devices.
</html:p>
<html:p>
(ii)
<html:span class="EnSpace"/>
The credit card allows for deferred interest purchases of a medical service, product, or device.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
A loan secured by real property.
</html:p>
<html:p>
(C)
<html:span class="EnSpace"/>
Debt charged to a general purpose line of credit.
</html:p>
<html:p>
(D)
<html:span class="EnSpace"/>
A general purpose unsecured installment loan.
</html:p>
<html:p>
(3)
<html:span class="EnSpace"/>
For the purposes of this subdivision, “medical service, product, or device” does not include cosmetic surgery, as defined in Section 1367.63 of the Health and Safety Code, and includes, but is not limited to, all of the following:
</html:p>
<html:p>
(A)
<html:span class="EnSpace"/>
Any service, drug, medication, product, or device sold, offered, or provided to a patient by either of the following:
</html:p>
<html:p>
(i)
<html:span class="EnSpace"/>
A person or facility licensed under Division 2 (commencing with Section 1200) of the Health and Safety Code, except for Chapters 3.35 (commencing with Section 1596.60) to 3.65 (commencing with Section 1597.70), inclusive, of that division.
</html:p>
<html:p>
(ii)
<html:span class="EnSpace"/>
A person licensed under Division 2 (commencing with Section 500) of the Business and Professions Code, except for Chapter 11 (commencing with Section 4800) of that division.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
Initial or subsequent reconstructive surgeries, as defined in Section 1367.63 of the Health and Safety Code, and followup care deemed necessary by the attending physician and surgeon.
</html:p>
<html:p>
(C)
<html:span class="EnSpace"/>
Initial or subsequent prosthetic devices, as defined in Section 1367.635 of the Health and Safety Code, and followup care deemed necessary by the attending physician and surgeon.
</html:p>
<html:p>
(D)
<html:span class="EnSpace"/>
A mastectomy, as defined in Section 1367.635 of the Health and Safety Code.
</html:p>
<html:p>
(k)
<html:span class="EnSpace"/>
“Person” means any individual, partnership, corporation, trust, estate, cooperative, association, government or governmental subdivision or agency, or other entity.
</html:p>
<html:p>
(
<html:i>l</html:i>
)
<html:span class="EnSpace"/>
“Prequalifying report” means a report containing the limited
information permitted under paragraph (2) of subdivision (b) of Section 1785.11.
</html:p>
<html:p>
(m)
<html:span class="EnSpace"/>
“State or local child support enforcement agency” means the Department of Child Support Services or local child support agency acting pursuant to Division 17 (commencing with Section 17000) of the Family Code to establish, enforce or modify child support obligations, and any state or local agency or official that succeeds to these responsibilities under a successor statute.
</html:p>
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<ns0:Num>SEC. 2.</ns0:Num>
<ns0:Content>
<html:p>
No reimbursement is required by this act pursuant to Section 6 of Article XIII
<html:span class="ThinSpace"/>
B of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIII
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B of the California Constitution.
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