Regulatory Hurdle #1: Licensing
Determine when a license is required to extend credit.
Under Texas law, a lending license is required when an entity
makes consumer loans with interest rates in excess of 10%. A
registration is required to engage in retail installment sales if
the seller is not otherwise an authorized lender. You also must
determine whether a license is required to collect any debt that
is owed under the finance arrangement. Under Texas law, a
third party debt collector must register and file a surety bond
with the Texas Secretary of State.
Regulatory Hurdle #2: Disclosures
Make sure that proper disclosures have been made under
state and federal law. Some of the applicable federal laws that
potentially require disclosure include the Truth in Lending Act,
the Fair Credit Reporting Act, the Gramm-Leach-Bliley Act and
the Fair Debt Collection Practices Act. In Texas, the applicable
state laws are found in the Texas Finance Code and depend on
the type of credit that is being offered. In general, a patient
finance plan is subject to the Federal Truth in Lending Act if
consumer credit is extended and is payable in more than four
installments or a finance charge is imposed. It is important to
note that fees other than interest rates may be finance charges.
It is imperative that any dental practice that extends credit to
patients comply with the State and Federal disclosures. Failure
to properly disclose the terms of a consumer finance transaction can result in serious fines and penalties.
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Steps For Success
Know in advance how you plan to structure any patient
finance programs.
Obtain and maintain any necessary licenses.
Develop appropriate disclosure and financing documents.
Train employees on how to properly prepare the
disclosure and financing documents.
Determine in advance the fees you wish to charge – and
put controls in place to make sure only the appropriate
fees are being charged.
Implement policies and procedures for compliance in all
phases of the financing process.
Maintain all lending files for the time required by law.
Remember, the best practice is to consult wi Ѡ