After a multitude of consumers came forward with complaints about deferred interest credit products, California responded with a new law that will go into effect in July, prohibiting veterinary providers from proactively signing clients up for deferred interest credit cards, such as CareCredit®. The law applies to any medical service provider that offers third-party deferred interest credit products, and also affects dentists, chiropractors, cosmetic surgeons, vision care providers and more. Another well-known deferred interest credit product that will be affected is the WellsFargo® HealthAdvantage card.
Under the new law, clients will still be able to sign up directly for these products on their own time, using a smartphone, computer or laptop, or by using tablets specifically provided by CareCredit® for this purpose. Providers can still market these credit cards, but they will no longer be able to help people sign up at their practices or to pre-fill out an application for a deferred interest credit card on behalf of a client. Providers also will be barred from charging deferred interest medical credit cards for services not yet performed, a practice that was more commonly encountered in dental offices.
The new law is the result of legislation signed by California Governor Gavin Newsom in October 2019, and is meant to protect consumers from unwittingly signing up for credit products that do not require interest payments during an introductory period, but that still accrue interest at high rates during that introductory period.
Few consumers understand that if they fail to pay the entire balance during the introductory period or if they make a late payment, they end up with an interest charge that can be larger than the remaining balance, according to California State Sen. Holly J. Mitchell, who co-authored the law, and Jen Flory, a health policy advocate with Western Center on Law & Poverty.
In a statement regarding the legislation, Senator Mitchell said, “while third-party financing may have a place when patients need services that they cannot immediately pay for, more needs to be done to protect consumers. [They] should not feel pressured into applying for these products and need to better understand what they are signing up for.”
The new law mandates that before a client applies for CareCredit® or similar products, veterinarians (and other medical providers) MUST provide the following:
— A written estimate of the total cost of services;
— A written or electronic notice that fully discloses how deferred-interest credit products work, so pet owners are fully aware of the risk of significant additional interest and penalties when payments aren’t made on time or if they can’t pay their balance off within a specified period;
— A written disclosure stating that the pet owner does NOT have to choose this payment option because other options are available.
While California is currently the only state that has enacted legislation that seeks to strengthen consumer protections around medical debt, other state legislatures will likely follow soon, as these types of deferred interest credit products come under increasing scrutiny.
Consumer credit advocates and credit industry analysts like Ted Rossman of CreditCards.com, advise consumers to avoid deferred interest plans entirely, regardless of where they sign up for them. Says Rossman, “I’m really suspicious of this idea you can be charged retroactive interest if you can’t make all the payments before the clock runs out. That can end really badly.”
While 3rd-party financing options like CareCredit® certainly have a place in veterinary practices – they can be helpful tools for the approximately 40% of pet owners who are approved – veterinary professionals should consider additional payment options that are free from the pitfalls of deferred interest plans.
Alternative financing arrangements such as those offered by VetBilling® are simple, transparent, and easy for pet owners to understand.
VetBilling® payment plans allow pet owners to pay over time in installments – just like CareCredit® – but VetBilling’s fees are fixed and upfront. Pet owners are never surprised by additional interest or hidden charges.
The veterinary practice is in control of all payment plan terms and conditions, including the length of the payback period and the amount of down payment required. It is easy for practices to manage their financial risk because they have the ability to pre-qualify pet owners using the robust credit analysis tool that is built into VetBilling’s secure, web-based platform.
For more information about how VetBilling® can help both veterinarians and pet owners, give us a call at 800-766-1918, Monday – Friday, between 9am and 6pm Eastern, or visit our website at https://vetbilling.com/how-it-works/
— “California curbs deferred-interest credit for veterinary care.” JAVMA News, January 2020. https://www.avma.org/javma-news/2020-01-01/california-curbs-deferred-interest-credit-veterinary-care
— “Increased scrutiny of health care credit cards continues.” Association of Health Care Journalists, February 24, 2020. https://healthjournalism.org/blog/2020/02/increased-scrutiny-of-health-care-credit-cards-continues/
— “You Can No Longer Sign Patients Up for Deferred Interest Medical Credit Cards in California.” Sleep Review, March 20, 2020. https://www.sleepreviewmag.com/practice-management/laws-regulations/financial/sign-patients-up-deferred-interest-medical-credit-cards-california/
— “Dental patients face years of debt, inflated bills with ‘out-of-pocket’ credit cards.” Sacramento Bee, December 19, 2019. https://www.sacbee.com/news/investigations/article238073624.html
— “Medical Credit Cards Purport To Ease Medical Cost Burdens, But End Up Creating Stress. A New Western Center-Sponsored Bill Could Change That.” Western Center on Law & Poverty: https://wclp.org/medical-credit-cards-purport-to-ease-medi…/
— “Californians fall prey to high interest credit card loans while in exam chairs: Here’s a fix.” CalMatters.org. https://calmatters.org/commentary/medical-credit-cardss/
— California Senate Bill 639: Bill Text – Medical Services Credit or Loan