and other stuff you don’t need to worry too much about! A few weeks ago most orthodontists received the April edition of the AAO “Bulletin.” This edition was presented by the AAO Legal Department and discussed the Truth In Lending (TIL) regulation and made certain recommendations to orthodontists regarding what they should and should not be doing with respect to patient financing and payment plans. The article immediately triggered a number of calls to our office from clients and other orthodontists and staff who wondered if the sky was falling because they were not doing some of what was recommended and were doing things that the Legal Department said not to do. If you are busy and do not want to continue reading to the end of this, just pay attention to the small print above (under the title) and you will get the gist of the rest of this article.
First let me mention a few basics. The Truth In Lending Act (TIL) was passed in 1968, 47 years ago, and every speck of that law, as well as the significant amendments to the regulation since then, had the intent of regulating the commercial credit granting business. That includes banks, consumer finance, credit unions, automobile lending, and every conceivable sort of bank and retail store credit card issuing organization. The main point here is that this important and useful regulation was not written nor intended to apply to an orthodontist in the honest pursuit of his or her business choosing to allow patients to make payments throughout the course of treatment.
No matter the intent of the writers of this regulation, technically the regulation does apply to orthodontists, even the 99% who do not charge interest! That’s because the regulation applies to any credit grantor (that’s you!) that makes payment agreements of more than four installments, whether interest is charged or not. How it applies, and much more important how it is enforced, is vague, unclear, and untested in the courts. Since 1980 when I started my consulting career I have never met, spoken to, or even heard of an orthodontist who was prosecuted, sued, or even threatened with those over any issues related to TIL. It is possible, I suppose, that has happened and if you choose to contact the AAO Legal Department to ask, make sure you get a specific case law reference so you can look it up. I doubt you’ll find one!
I cannot know if the writer of the AAO article was being facetious, sarcastic, or serious, but he actually said: “The orthodontist can avoid the necessity of TIL disclosures by limiting the number of installments…….” Which means of course to limit payment plans for $6000 of orthodontic care to four payments or less!!
The author went on to state that an orthodontist offering a discount for payment in full, a practice followed by the vast majority of the profession throughout orthodontic history, must consider that discount a hidden interest charge and must disclose the annual percentage rate according to TIL requirements. Again, while at a technical level the TIL regulation applies to orthodontists, the intent was never to regulate the business or the private practice of orthodontics.
Our advice to our clients is to do what you have always done and that is to honor the intent of Regulation Z (TIL). That means that you accurately disclose the complete details of your credit granting, such as fees, payment amounts, late fees, due dates, etc., to your patients who make financial arrangements. Don’t hide stuff. Be honest. Be transparent. Keep your promises to your patients. Do all that and you will not run afoul of the FTC and their TIL regulation.
Remember, the AAO attorneys, your personal attorney, etc. best serve you and the profession by providing advice that is intended to keep the members and clients out of any trouble. They are not in place to help your practice grow, to be more efficient, or to be more profitable. The problem with this, and other similar articles and legal opinions, is that they often provide counsel and advice that damages the practice efficiency and profitability. Sometimes advice that is good in content is not so good in context, and I believe this recent article falls into that category.
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