BILL ANALYSIS �
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|Hearing Date:April 7, 2014 |Bill No:SB |
| |1256 |
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SENATE COMMITTEE ON BUSINESS, PROFESSIONS
AND ECONOMIC DEVELOPMENT
Senator Ted W. Lieu, Chair
Bill No: SB 1256Author:Mitchell
As Introduced: February 21, 2014 Fiscal: Yes
SUBJECT: Medical services: credit
SUMMARY: Prohibits all healing arts licensees or an employee or agent
of that licensee from arranging for or establishing credit extended by
a third party without first providing a written notice and treatment
plan to a patient and would prohibit that arrangement or establishment
of credit with regard to a patient who has been administered or is
under the influence of general anesthesia, conscious sedation, or
nitrous oxide. It also prohibits all healing arts licensees or an
employee or agent of that licensee from charging treatment not yet
rendered or costs not yet incurred to an open-end credit extended by a
third party without providing the patient with information regarding
the treatment and services, and requires all licensees to refund any
payment received for treatment that has not been incurred within 15
business days upon the patient's request.
Existing law:
1) Defines "open-end credit" as the credit extended by a creditor
under a plan in which the creditor reasonably contemplates repeated
transactions. (Business and Professions Code (BPC) � 654.3(i)(2))
2) Specifies that the creditor may impose a finance charge from time
to time on an outstanding unpaid balance and the amount of credit
that may be extended to the debtor during the term of the plan is
generally made available to the extent that any outstanding balance
is repaid. (Civil Code (CC) � 1812.405)
3) Specifies that the term patient includes, but is not limited to,
the patient's parent or other legal representative. (BPC � 654.3
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(i)(3))
4) Prohibits a dentist or employee or agent of a dentist from charging
treatment not yet rendered, or costs not yet incurred, to an
open-end credit extended by a third party without first providing
the patient with specified information regarding the treatments and
services to be rendered and ensuring the patient's receipt of the
treatment plan. (BPC � 654.3 (a))
5) Requires a dentist, within 15 business days of a patient's request,
to refund to the lender any payment received through credit
extended by a third party that is arranged for or established in a
dental office, for treatment that has not been rendered or costs
that have not been incurred. (BPC � 654.3 (b))
6) Requires a dentist or an employee or agent of a dentist to provide
the patient with a written notice on one page in at least 14 type
font and to get a signature from the patient in order to arrange
for or establish credit extended by a third party. (BPC � 654.3
(c))
7) Prohibits a dentist or employee or agent of a dentist from
arranging for or establishing credit extended by a third party for
a patient with whom the dentist or employee or agent of the dentist
communicates with in a language other than English unless the
written notice information is also provided in that language. (BPC
� 654.3 (e))
8) Prohibits a dentist, employee or agent of that dentist from
establishing credit that is extended by a third party for a patient
who has been administered or is under the influence of general
anesthesia, conscious sedation or nitrous oxide. (BPC 654.3 (f))
9) Establishes that a person who willfully violates these provisions
is subject to civil liability. (BPC � 654.3(g))
This bill:
1) Defines a "licensee" as an individual, firm partnership,
association, corporation, limited liability company or cooperative
association.
2) Defines "licensee's" office as an office of a licensee in solo
practice or an office in which services or goods are provided by
the licensee or by employees in that office, or by independent
contractors in that office.
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3) Defines "open-end credit" as credit extended by a creditor under a
plan in which the creditor reasonably contemplates repeated
transactions.
4) Allows the creditor to impose a finance charge from time to time on
an outstanding unpaid balance, up to any limit set by the creditor.
5) Specifies that a "patient" includes, but is not limited to, the
patient's parent or legal representative.
6) Prohibits a healing arts licensee, or an employee or agent of that
licensee, from arranging for or establishing credit extended by a
third party for a patient without first providing a written notice
and a written treatment plan.
7) Prohibits the arrangement or establishment of credit with regard to
a patient who has been administered or is under the influence of
general anesthesia, conscious sedation or nitrous oxide.
8) Prohibits a healing arts licensee, or employee or agent of a
licensee, from charging treatment not yet rendered or costs not yet
incurred to an open-end credit extended by a third party that is
arranged for or established in the licensee's office without first
providing the patient with specified information regarding the
treatment and services to be rendered and ensuring the patient's
receipt of the treatment plan.
9) Requires a healing arts licensee to refund to the lender any
payment received for treatment that has not been rendered, or costs
that have not been incurred within 15 business days upon the
patient's request.
10)Provides that a person who willfully violates these provisions is
subject to civil liability.
FISCAL EFFECT: Unknown. This bill has been keyed "fiscal" by
Legislative Counsel.
COMMENTS:
1. Purpose. This bill is sponsored by the Consumer Federation of
California . According to the Author, SB 1256 extends the current
protections that patients receive in a dental office to other areas
of the medical field. The Author believes that medical credit
cards, extended through third party lenders, but solicited by
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medical providers, pose a significant risk to consumers who may not
fully understand the arrangements that are being made for them by
their provider or provider's office. The interest rates for these
credit cards can range between 24 and 28 percent and may include
significant penalty fees charged retroactively on the entire cost
of the procedure. The significant risks created by deferred
interest credit cards in connection to medical services make it
essential that consumers fully understand the arrangements they
make with their medical providers.
2. Background.
a) Medical Credit Card Popularity. Medical credit cards have
increased in popularity over the past decade. U.S. financial
institutions have partnered with health care providers to offer
medical credit cards to people without health insurance or those
who require services not covered by their insurance including
dental care, vision, hearing aids, cosmetic procedures and
veterinary care. According to Craig Conway, a research
professor with the University of Houston Law Center in Texas,
U.S. citizens spend about $294 billion annually on out-of-pocket
medical expenses, a quarter of which they charge to standard
credit cards. However, an estimated 79 million people have
trouble paying those expenses and, as a result, health care
providers struggle to collect money owed to them (University of
Houston Law Center, Health Law Perspective, November 2009). The
American Medical Association and the American Dental Association
have no formal policy on medical credit cards, but some
practitioners refuse to use them, saying they threaten to
exploit the traditional relationship between provider and
patient.
b) Medical Credit Card Companies. Consumer Reports indicates
that health care credit card providers such as Capital One
Healthcare Finance, Chase Health Advance and Citi Health Card
charge interest rates ranging from 24 to 28 percent with credit
limits as high as 40 thousand dollars (Overdose of Debt,
Consumer Reports, July 2008). Financial institutions such as
General Electric, U.S. Bancorp and Citigroup are also medical
creditors. According to a November 2007 Business Week article
entitled, Fresh Pain for the Uninsured, General Electric owns
Care Credit, and according to Care Credit's website, it has 6
million customers and is marketed to dentists, plastic surgeons
and some hospitals. U.S. Bank, a U.S. Bancorp unit, finances
about $2 million in patient debt per month through a
medical-benefit firm, charging most customers annual interest of
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13.5 percent and as much as 24 percent on late bills.
c) Other States. The inception of medical credit cards began
in a few states, including Texas and North Carolina, and spread
quickly across the country. However, in recent years, several
states have issued warnings to consumers about using medical
credit cards. Some states have sued medical credit card
companies for deceptive business practices.
i) In August of 2009, Minnesota's Attorney General, Lori
Swanson, issued a consumer alert to warn patients that a trip
to a clinic looking to "boost its bottom line" could result
in a barrage of high-pressure sales pitches. Attorney
General Swanson also issued a consumer alert warning for
residents to be aware of abusive practices involving medical
credit cards and has investigated several providers. She
remarked, "[T]his is the health care version of sub-prime
predatory mortgage lending. Enrolling people in exploding
interest credit cards, not explaining the terms of those
credit cards, [and] jeopardizing people's credit histories."
In 2010, Attorney General Swanson sued two chiropractic
clinics, charging that, among other things, they signed
patients up for credit cards without their knowledge and
charged them thousands of dollars for services not yet
provided (The Washington Post, Be Skeptical of Health-Care
Credit Cards, August 2010; Canadian Medical Association
Journal, 2010; The Office of the Attorney General, Minnesota,
Lori Swanson, Health Care Credit Cards, available at
http://www.ag.state.mn.us/Brochures/pubHealthCareCreditCards.p
df).
ii) In August of 2010, New York's Attorney General,
Andrew Cuomo, announced an expansion of an investigation into
the "predatory lending practices" of medical centers pushing
the cards. The investigation, launched after hundreds of
complaints from consumers, had already found that some health
care practices were using "fast-talking sales pitches to
pressure and deceive" consumers, including seniors and
vulnerable patients. Specifically, the state accused medical
card provider CareCredit of having deceptive terms and
pushing the cards on unwary patients. As a result, as part
of the Consumer Financial Protection Bureau lawsuit,
CareCredit was ordered to issue nearly 2 million dollars in
refunds to consumers in the state of New York (The Wall
Street Journal, Market Watch, Medical Credit Cards Come with
a Catch, September 2013; Canadian Medical Association
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Journal, 2010).
iii) Similarly, in 2013, the Consumer Financial
Protection Bureau ordered GE Capital Retail Bank and its
subsidiary, CareCredit, to refund up to 34.1 million dollars
to potentially more than 1 million consumers, including the
aforementioned consumers in the state of New York, who were
victims of deceptive credit card enrollment tactics. At
doctors' and dentists' offices around the country, consumers
were signed up for CareCredit credit cards they thought were
interest free, but were actually accruing interest that
kicked in if the full balance was not paid at the end of a
promotional period (Consumer Financial Protection Bureau,
CFPB Orders GE CareCredit to Refund $34.1 Million for
Deceptive Health-Care Credit Card Enrollment, December 2013).
iv) In 2010, Aspen Dental, reached a settlement with
Pennsylvania authorities over claims that it had failed to
tell patients that missing a payment would mean the rate
would rise from zero to nearly 30 percent (The New York
Times, Patients Mired in Costly Credit From Doctors, October
2013).
v) In 2013, the Ohio Attorney General sued the operators
of several hearing aid clinics, claiming that they misled
customers about using medical credit cards to pay for
batteries and warranties (The New York Times, Patients Mired
in Costly Credit From Doctors, October 2013).
3. Arguments in Support. The Consumer Federation of California
(Sponsor) supports the bill and writes, "Medical credit cards
provide a financing option that helps patients pay for treatments
or procedures that are not otherwise covered by their medical
insurance?However, in some instances, patients who thought they
were signing up for a payment plan directly with their provider
later discover that they have signed credit applications and may
have eventually paid up-front for treatments they have not yet
received?patients, primarily elderly, low-income or limited
English-speaking, who are offered a credit card when they are most
vulnerable? may not understand that the financing option they have
been recommended is actually a credit card or loan extended through
a third party. SB 1256 is not intended to prohibit medical
providers from helping to arrange credit cards or loans for their
patients, but aims to set forth basic standards governing these
credit card arrangements and provide basic consumer protections."
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4. Prior Legislation. AB 171 (Jones, Chapter 418, 2009) established
procedures for dentists to follow when arranging a medical credit
card, extended through a third party lender, to a patient.
SB 1633 (Kuehl, 2008) would have prohibited a person providing
dental services, or an employee or agent of that person, from
charging to a line of credit or other extension of credit, or
accept payment from loan funds for services that the patient,
client, or customer has not yet received. ( Status : Governor
Schwarzenegger summarily vetoed SB 1633 because of the budget
crisis.)
NOTE : Double-referral to Judiciary Committee (second).
SUPPORT AND OPPOSITION:
Support:
Consumer Federation of California (Sponsor)
Opposition:
None received as of April 1, 2014
Consultant:Le Ondra Clark, Ph.D.