Provider Alert: Beware of Predatory Loan Sharks During COVID-19 Outbreak

As the Coronavirus outbreak (“COVID19”) spreads, the current administration, in addition to state and local governments, have discouraged or even legally restricted non-emergent or elective healthcare visits, medical procedures, or surgeries. Many healthcare providers, especially those working in non-acute or non-emergent settings, have seen downturns in their businesses. Consequently, many healthcare providers may be looking for additional funding, due to the economic impact of the COVID19, and some may turn to (or be approached by) non-traditional financial institutions. While non-traditional financing arrangements vary, providers must be wary of predatory lending schemes that can end up costing far more than original loan amount.

Even in these times of crisis, predatory lenders or loan sharks emerge, seeking to take advantage of desperate businesses, including healthcare companies. This predatory arrangements often involve a non-traditional financial institution or loan shark presenting a factoring agreement (essentially, a disguised loan) to purchase Claims Receivable of a healthcare provider or pharmacy, in exchange of providing an upfront funding amount that is less than the total sum of the Claims Receivable. Such agreements will likely include fees and charges (i.e., disguised interest) well-over the statutory usury limit, which in turn, make the total amounted owed far in excess of the actual amount. In addition, these arrangements often have very high penalties for late payments, and often require the business owners to sign personal guarantees.

Interest rates that are over the statutory usury limits, depending on the state laws, can be subject to penalties imposed under civil and criminal statutes. However, the factoring agreement may include provisions that would hinder the borrower’s rights and that would make it difficult to bring claims against the loan shark.

How Frier Levitt Can Help
Reviewing lending agreements can be overwhelming and confusing, especially when the providers are focusing more on treating patients. Frier Levitt has experience in examining contracts and challenging them in Court and can assist in determining whether a contract is a predatory lending scheme as well as disputing such contract.  Our attorneys are here to assist your recovery and maintain the success of your business. Frier Levitt will review your contracts, and often can handle your claims on Alternative Fee Arrangements. Contact us to learn how we can help you.

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