Earlier this month, the CFPB published a report on specialty financial products, such as medical credit cards and installment loans, which are sold to patients as a way to address the growing costs of medical care. The report focuses on some of these financial products, which patients once used primarily for elective care but now use to cover everything from emergency room visits to medications to regular checkups, as well as dental and vision visits and treatment. The report claims these specialty products are typically more expensive for patients than other forms of payment, including conventional credit cards, with interest rates often reaching above 25%. The report further alleges that these products often have deferred interest plans, which can prove especially expensive and unaffordable for patients.

The report addresses some of the purported risks to consumers of using financing products to pay for medical procedures and services. The report provides, inter alia, a background on the products, identifies potential financial risks to consumers, and offers a summary of the terms for a sample of specialty products. The report also addresses certain findings by the CFPB:

  • Medical financing companies market their products directly to healthcare providers: Financial firms market primarily to hospitals and other healthcare providers and give them marketing training and promotional materials to use when offering the products to patients. The incentives financial firms market to healthcare providers include the promise of cost savings, payments within a few days, and minimal financial risk, leading the CFPB to believe that healthcare providers may be dis-incentivized to explain legally mandated financial assistance programs or zero-interest repayment options before offering these products to patients.
  • Patients need guidance on terms and risks: While medical financing companies service the credit cards and loans, healthcare providers are the ones that offer the products to patients as well as disclose the products’ terms, which means they may be unable to adequately explain complex terms, such as deferred interest plans, to patients and rely solely on the marketing materials and training provided by the financing companies.
  • Patients can get stuck with ballooned deferred interest and lawsuits: The CFPB found that over the past decade, purchase amounts as part of deferred interest promotions have decreased in all purchase categories except in the category of medical care, possibly because medical debt is not easily anticipated and the costs are not known until after services are rendered. Further, financing medical debt on a credit card may increase patients’ exposure to extraordinary credit actions that healthcare providers would typically not pursue, such as lawsuits.

You can find a copy of the report here.