The nation is drowning in medical debt. According to KFF (nee the Kaiser Family Foundation) some 100 million of us have medical debt – 41% of adults. About one in five do not expect to ever be able to pay their debt off, according to KFF.
Enter Epic River, a Fort Collins CO based lending as a service provider, which came up with a startling idea. What if it took all of, say, a hospital’s unpaid bills and handed them off to a financial institution to professionally service that mountain of debt, asked Jeff Grobaski, CEO of Epic River.
What FI would take the debt? That’s where this idea is truly inspired. In this show, Dan Edgerton, Chief Lending Officer of Clarity CU, explains that the credit union assumes zero risk. Nada.
Even though it does no credit check when taking over the debt. That’s right: no FICO check. Nothing.
He admits that the CU board wondered if this was too good to be true.
But it is true and that is because when a debt is determined to be unlikely ever to be repaid, the paper is returned to the originating hospital which assumes the loss.
But the kicker is that so far Clarity has a default rate of only about 7%. That means 93% of the paper is in fact being serviced by the debtors.
Grobaski adds that many of the participants in the program have decent credit scores, often in the vicinity of 700.
That makes sense. A person with a sub-300 FICO score may already have simply given up. At 700, however, the person has much to lose and probably wants to do the right thing.
To really understand this innovative program, listen to the whole podcast. It’s stuff you almost certainly have never heard before.
