Medical Credit Cards Often Drive Patients Into Financial Disaster While Doctors and Dentists Get Paid Immediately
Richard Fonfrias, J.D.
Chicago’s Financial Rescue & Bankruptcy Lawyer
Fonfrias Law Group, LLC
A Medical Credit Card issued by banks and finance companies often start out at a zero interest rate, which seems very attractive. But when the initial no-interest period expires, you most likely will get hit with huge interest rates – and enormous penalties for late payments – that multiply the cost of the services you receive.
Patients who need money to pay for health care often get medical credit cards shoved down their throats by doctors and dentists who want to make sure they get paid. And with the patient in pain and needing immediate attention, it’s hard for the patient to say no. The fact that the patient is stuck with a huge credit card bill that he cannot pay is not important to the medical provider.
Medical credit cards are typically used to pay for things not covered by Medicare or covered only partly by private insurance, such as hearing aids. The doctors get paid immediately, while the harsh terms of the credit card are still unknown to the patient … until the bill arrives in the mail.
The problem continues to grow as more and more patients apply for these cards from banks and finance companies. And while many patients think the doctor or dentist is offering an in-office payment plan, they often don’t realize that their application was going to a finance company. Other patients may not be aware that the interest rate will go through the roof if the bill is not paid on time in full. Some finance companies do not perform credit checks to see if the patient is worthy of credit. As a result, the patient piles more debt on top of what he already has and may not be able to afford. For those who cannot pay their creditors, they may be faced with foreclosure or bankruptcy.
To entice the patient, finance companies and banks may offer a no-interest period for as long as many months. However, after that time, the patient may be charged as much as 25 to 30 percent for a debt that is not paid in full. Another surprise to patients is that the high interest rate may not apply only to the remaining balance of the debt. Instead, it is charged to the original amount of the entire loan, which often goes back many months.
As a result, many lawsuits have been filed by state authorities and patients’ lawyers against medical providers, banks and finance companies for fraudulent and misleading lending practices. In one instance, the New York State attorney general discovered that 90 percent of one company’s customers chose the option to pay no interest if the debt is paid in full. About one fourth of those patients were forced to pay 26.99 percent interest on the full amount of the original loan.
In the settlement, the credit company agreed to (1) give New York patients a clear description of the interest rate to be charged and how to avoid it, (2) give patients a three-day period to change their minds after they applied for the loan, and (3) give patients a way to appeal a disputed claim.