IVF and Consumer Finance Protection Bureau

There’s an interesting article in the WSJ about “fertility finance”—that is, lending out large sums of money on an unsecured basis in order to cover fertility treatments for the infertile. Since the treatment runs quite a bit of money, this represents an opportunity to loan quite a bit of money.

I see three distinct potential problems. First: what happens in the case of failure? IVF treatments are notoriously difficult, often requiring several tries before success. The article mentions that some of these firms offering finance offer refunds and assume the risk; naturally one supposes that means higher interest rates for everyone else.

On the demand side:

"We thought [taking out a loan] was the best option because we trust our doctor," says Karen Coker, a 27-year-old police-station clerk in New Carrolton, Md.

The trouble, on the supply-side, is intertwined and is mostly involved with bad incentives. Apparently many of these finance firms are not regulated as banks and apparently doctors often invest in them. The potential for conflicts of interest looks similar to pharmaceuticals—how often will doctors be shaded towards offering care when they have an equity stake in its happening? And might patients be very interested in the knowledge that their doctors have a business interest in steering them towards a certain means of finance?

It’s unclear why the problems faced by these firms seeking to make these loans are so specialized as to require specific firms to service them—that is, why can’t banks take them on? I suppose there’s some sort of regulatory evasion here, and I would guess it’s a problem the Consumer Finance Protection Bureau might be well-poised to take a look into.