April 2, 2015 by Lisa Brammer
There are two things you can count on when there are consumer to business, or business to business transactions: number 1, there are going to be expectations—on both sides—as to what the transaction looks like, and number 2, money is going to change hands. In order for this relationship or transaction to be successful, the two parties must have a meeting of the minds (preferably upfront) of each party’s expectations and responsibilities.
In the case of a simple transaction like the purchase of a cup of coffee—it’s a no brainer: One party is supplying the coffee, the other is paying the agreed upon price for it. But not all transactions are simple, some get pretty complex, that’s where business transaction agreements and financial agreements come into play. By putting everything in writing, a lot of misunderstandings can be avoided.
In the case of a business transaction agreement, you will want to describe exactly what each party will receive as a result of the transaction—the more specific you get describing products or services provided, the better. It’s also a good idea to have a section dedicated to defining terms: what does “default” mean to you? Does “delivery” mean, to the outside of the building or inside up three flights of stairs? You get the drift, the more specific you get, the less chance you have for misunderstandings. You will also want to have a section dedicated to the exact cost and payment terms of the transaction and what will happen if the terms are not met.
In the case of financial agreements, they center on the financial side of the agreement. Let’s say you are a doctor who owns his own practice, for you, a financial agreement would be the way to go. You are providing medical care in exchange for financial compensation. Your financial agreement should spell out the patient’s responsibilities, what their end of the agreement looks like. It should include things like: applicable copays are due at time of service or patient is responsible for paying all amounts not paid for or partially covered by insurance, things like that. It is also a good place to request authorizations: patient authorizes release of medical information to process claims, or patient authorizes any health benefit plan(s) covering this account to pay your practice directly. You should also spell out what happens if an account goes unpaid. Will their account be sent to a collection agency? How many days delinquent does it have to be before it is sent to collections? If they are a no-show for an appointment, will they be charged a fee? When you set expectations early on, there will be fewer surprises—for both sides—later.
Financial agreements not only let your patients know what is expected, they also provide your staff with a written policy of how billing and collections transpire in your practice. It lets your receptionists know they are supposed to ask for (and collect) copays at time of service and tells the billing department when to send delinquent accounts over to collections.
You can find lots of articles online that explain how to write your own agreement, but use caution if you decide to go this route. Having a written—and signed—financial agreement in place will not only set expectations for patients and employees it can also be used in court to support the rights and responsibilities of both parties in the transaction. That’s why it is important to have a lawyer review your agreement before it is used in court. Sometimes legalese sounds one way to us, but is interpreted much differently in a court room.
Oftentimes we see clients include a statement that refers to the patient being subject to a finance charge of up to 17 % APR if the account is 60 or more days overdue. Sound good to you? The thing is, the term “finance charge” has a legal definition found in the Consumer Act. It means that the creditor is collecting the interest, or other money, as a condition of an extension of credit. The term “finance charge” is defined to be more than mere interest. It can include any additional charges imposed when payment is deferred, including the billing charges in the agreement. Since it is such a loaded term it should not be used unless a consumer credit transaction is clearly what the creditor wants.
The imposition of attorney’s fees is strictly forbidden in consumer credit transactions, but may be added on other types of agreements.
Consumer credit transactions are subject to strict disclosures, format and pleading requirements that are quite lengthy and detailed. A technical violation of any of them could result in the creditor not only not being able to collect its account, but they could also be subject to penalties that would include paying the consumer’s attorney’s fees.
I bet you never thought a statement referring to a “finance charge” would open up such a huge can-of-worms.
We have a network of attorneys who are very knowledgeable in the field of creditors’ rights and remedies. If you have any questions regarding the financial agreement you are currently using, email it to us and we will have it reviewed for you—free of charge—no strings attached.
A thought out, well written business transaction or financial agreement can go a long way to help a business or practice prosper.
Founded in 1950, United Credit Service, Inc. is a full service, licensed revenue cycle management and debt collection agency in Wisconsin providing effective, customized one on one management and recovery solutions for our business partners. Visit our website at http://www.unitedcreditservice.com or call 877-723-2902.