The regulations surrounding patient finance can be a barrier to entry for some dentists. Mike Aldred, operations director at Carefree Credit Dental Finance, a DPAS Dental Plans’ Business Bites partner, explains how to comply with the regulations and introduce a finance option that makes great business sense.
Patient finance is now an essential part of running a professional service. The cultural acceptance of credit is now entrenched in the public psyche and people have grown used to using credit – you can’t walk down the high street without seeing signs for ‘zero percent’, ‘interest free’ and ‘APR’.
Retailers use such personal credit as a tool to sell products and services, putting the desirable within immediate reach of their customers. But it’s an unfortunate fact that dentists don’t make as much use of credit facilities as they might, mistakenly making assumptions that patients would prefer to pay for treatment using a credit card rather than take out a treatment-specific loan. But without knowing the details of the individual’s personal finances, it’s not only impossible to make this judgment, but can be a costly error.
Dental finance plans
Dentists need to be able to provide a finance solution that opens the door to more complex treatment options for all patients, but I estimate that less than 50% of UK dentists are currently offering financial products to patients. In some cases dentists are unaware of the range of patient finance available, but often they are reluctant to offer financing options because of the regulatory obstacles they believe need to be negotiated.
In my view, the most important thing to remember about finance is that it isn’t all about finance. These days finance should be viewed as a marketing tool, one that provides patients with options, just like offering a range of treatments. Used correctly, finance can help make quality dental treatment more affordable and encourage patients to say ‘yes’.
The easiest, most cost-effective and efficient way to provide finance is through a third party source. There are various options available including interest free and interest bearing loans, over anything from a few months to a few years. The important thing for dentists to know is that they can offer credit, but there are certain limitations and rules and regulations that must be observed.
Rules and regulations
If a practice wishes to offer anything other than interest free finance up to a maximum term of 12 months, they must be authorised through the Financial Conduct Authority (FCA), which enables them to become an authorised supplier of credit as a third party.
The FCA regulates consumer credit activity to protect and enhance the integrity of the UK financial system. This means that if a practice has FCA authorisation, its patients can be confident that when it comes to finance, the products and services being sold are designed to meet their needs and they will receive clear information about the costs and obligations before, during and after treatment.
Although practices that only want to offer interest free options up to a maximum of 12 months do not need to be regulated, being constrained in this way can cause potential affordability issues to some patients and undermine the benefits of offering patient finance at all. This is particularly the case for those patients needing a large course of treatment to improve their oral health or those who want a ‘smile makeover’ or orthodontic treatment for example. Before making the decision as to whether to apply for authorisation or not I ask dentists to consider the affordability of a £3,600 course of orthodontic treatment over 12 months, which would require a patient to find £300 per month.
This issue regarding authorisation is important as being authorised by the FCA not only enables a practice to offer a larger range of options, but also gives the patient vital protection, through their credit agreement, in the event of the clinician failing to provide the treatment promised.
Interest free finance
Some dentists do make the decision to ‘fund’ interest free finance for patients during the length of treatment, and providing they don’t charge any interest and they do not offer longer than 12 months to repay the money, there are no issues from a regulatory point of view. But from a business angle this approach has a number of disadvantages. Firstly the dentist is taking a risk on the patient defaulting on a promise of payment; secondly no credit check is done; thirdly the practice doesn’t receive the money up front as they would with an external finance option, so it does not positively effect cash-flow, and finally, it can impact negatively on the practice staff who have to administer these types of accounts – reconciling payments, collecting bad debt etc, which leads to many wasted hours.
Applying for FCA authorisation is completed online through a secure portal and although the form can be quite daunting, our team can hold the hand of the dentist or manager when completing the form and once completed authorisation can be obtained in as little as four weeks.
Some practices may previously have held the old Consumer Credit Licence (CCL), but this is now long gone and these practices will have either switched over to the FCA during their application ‘window’ or will have let the CCL expire. If practices previously held a CCL and it has expired, they need to apply again through the FCA if they want to offer the full range of options to patients. Our team has years of experience in helping practices and we provide guidance on the old CCL as well as FCA authorisation.
Most patient finance companies offer a range of options and Carefree Credit is no different. The most popular is interest free, and we have options that offer a low APR – typically 9.9% and 4.9%, with terms varying from six months to 60 months. We can also bespoke these options if a practice wants something more suited to their individual needs. Our aim is to provide a range of options that give patients a good choice, whilst keeping it cost-effective for the practice.
Although there are no accurate up-to-date figures to illustrate the rate of uptake of patient finance in dentistry I have worked in this area for 15 years and have witnessed a huge increase in the number of practices, especially those offering high-end treatments, using finance to help make treatment more affordable.
But the most forward-thinking dentists don’t just think about finance as simply a financial product, they also consider it as a marketing tool, breaking the cost of treatment into manageable monthly amounts that put complex treatment plans within the reach of patients.
If a dentist is offering high value treatments such as implants, smile makeovers or orthodontics for example, I would say that having a finance option is imperative to speed up the velocity of treatments going through the practice. This in turn creates greater revenues, improves cash flow, reduces white space and achieves faster growth and improved profitability.
For more information and to find out what Carefree Credit Dental Finance can do for you through DPAS’ new initiative, Business Bites, contact DPAS Dental Plans on 03456 802 820, email [email protected] or visit www.dpas.co.uk.