T
Who Is the Lender?
he tough economic conditions of the last several years have
legal matters
The second issue is to determine
who will actually be the lender. In this
day and age of sophisticated group practices, this is not always an
easy question to answer. The lender can be the dental practice itself,
a third party lender, a sister company related to the dental practice,
or a dental service organization with which the dental practice is
affiliated. Once the lender is determined, it must follow the applicable regulations. If the dental practice is not the lender, then the
dental practice generally is not responsible for complying with the
patient financing regulations. Many dental practices use third party
lenders to provide financing to patients and in those situations, the
third party lender is responsible for following the rules rather than
the dental practice. While the use of a third party lender can allow
a dental practice to avoid the issue of complying with the regulations, it can also deprive the practice of the opportunity
to earn the interest and fees that go along with being a
lender. It is this ability to earn additional income from
interest and fees that is prompting many dental practices
to become their own lenders under flexible and creative
patient finance plans that allow more patients to receive
dental services.
significantly impacted the ability of many patients to pay
for dental services. Many patients have also found them-
selves unemployed or in jobs that no longer carry dental insurance.
These challenging conditions have forced many dental practices to
develop non-traditional patient finance plans that are flexible and
creative. While more creative finance plans can help the public by
allowing more patients access to dental services, they must be care-
fully structured to comply with the law. Most consumer finance
transactions are regulated by state and federal law and there can
be serious consequences for extending credit to patients in a man-
ner that does not comply with the law. This article will cover the
major issues to consider when creating patient finance plans.
However, a dental practice should make sure that any patient
finance plans it offers are reviewed by an attorney who specializes
in consumer finance regulations.
Properly
Structuring
Patient
Finance
Plans
n
by Brian Colao
What Type of Credit is Being Offered?
n
?
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The first issue to consider is what type of credit is
being offered. Is it a Consumer Loan, Retail
Installment Sale, Line of Credit or other arrangement?
A Consumer Loan generally is a loan made for personal,
family or household purposes that is made by a person regularly engaged in making consumer loans and is either payable
in installments or has a finance charge assessed on it. In Texas,
there is an interest rate trigger of more than 10% for a transaction
to meet the definition of “consumer loan”. A Retail Installment Sale is
a transaction in which a consumer purchases goods or services (such as dental
services) and the provider of the goods or services allows the person to pay off the
purchase amount plus interest in installments. A Line of Credit is a revolving debt where the consumer has a
set amount of credit available. When a consumer repays part or all of the credit line, the amount the consumer
may charge against the line replenishes. Each of these arrangements is regulated differently.
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