New York's attorney general has fired what he hopes will be a warning shot at the industry of loan brokers and lenders targeting consumers who want to pay for elective procedures.
New York attorney general Eric Schneiderman has reached settlements with four companies that allegedly sold retail installment obligation loans at interest rates as high as 55 percent for New Yorkers trying to pay for elective medical and surgical procedures.
Schneiderman's office launched an investigation into the companies after receiving a complaint from a woman who used SurgeryLoans.com to pay for an $8,000 liposuction and was charged double that after interest.
The companies -- MyMedicalloan.com (doing business as SurgeryLoans.com), Duvera Billing Services, Highlands Premier Acceptance and Paramount Capital Group -- were not licensed to sell financed or brokered retail installment obligations in New York and in some cases were recommended to patients as potential financing options by doctors, often plastic surgeons, for elective procedures like facelifts.
Under the settlement, the companies will recast the loans for 317 New Yorkers at the state's legal interest rate of 16 percent and provide as estimated $230,000 in repayments and credits, and collectively pay $35,000 in fines.
The companies will also have to cease all sales of unlicensed loan products and notify consumer reporting agencies they shared consumer information with to delete all references to the transactions from customers' credit reports.
"Sales finance and other loan companies that bypass our state's licensing and usury laws and target New York consumers will be held accountable," Schneiderman said in a media release. "This behavior is particularly egregious when it targets vulnerable consumers seeking medical treatment with high-interest loans."
While bad debt can be a fairly huge problem for hospitals and physician practices and many now offer installment options, loans for elective procedures are typically used to pay the providers upfront, with the consumers paying back the lender over time, often traditional banks that make the loan through web brokers.