What the statutes mean

The state has laws that control the amount that you may add to your patient’s bill for late payment when credit arrangements were not made. This is significantly different than adding a finance charge where you have a written agreement to extend credit. In either case, the law requires that you have a written contract for the charge. If you expect to collect a charge for late payment on the patient’s account, it is just as important to tell the patient about this charge as it is to tell them the price for your services or other goods.

Late fees and finance charges are very sensitive subjects. Your patients have protection under both state and federal law. The forms that are printed in this section come from the State of Wisconsin Department of Financial Institutions. We strongly recommend that you consult with your attorney if you make any changes to these forms.

Late Charge

If you intend to add a charge for late payment, your patient should be given a notice or sign an agreement at the time of their first visit. This would normally be when a patient initially comes to you for care or, when an established patient begins a new course of treatment. The notice or agreement must state that payment is due by a specific date and that there is a penalty or late payment charge if payment is not received by that date.

The patient does not have the right to defer payment after the due date, but agrees to pay a charge for late payment. To be considered a late charge, you must treat the account as past due if payment is not made and not allow the patient to add more charges to the already past due account. The maximum rate is 1% per month, or 12% per year. You are free to use an absolute dollar amount instead of an interest rate as long as the amount imposed for the late charge does not exceed 1% per month or 12% per year.

You may set an interest rate that is less than 1% per month or 12% per year. If you set an interest rate below 1% a month or 12% a year you may not raise the interest rate without having the patient sign an agreement or without providing the patient with a new disclosure. The new interest rate can only apply to services or goods purchased after the patient was informed of the increase in the late payment fee. Please note that these are simple interest rates that can not be compounded.

A typical agreement concerning a late payment charge would be a statement on your statements or service agreements stating:

“Payment is due within 30 days of treatment or the sale of a product. A 1% per month (12% per year) late payment fee will be assessed on any unpaid balance remaining after 30 days.”

Remember, if a patient does not make their payment when due, you are not permitted to allow the patient to add any additional charges to their account. That means that all care must be paid for at the time of service until the patient has paid all past due amounts.

Statute excerpts

Maximum rate; prepayment, disclosure; corporations.

138.05(1) Except as authorized by other statutes, no person shall, directly or indirectly, contract for, take or receive in money, goods or things in action, or in any other way, any greater sum or any greater value, for the loan or forbearance of money,

goods or things in action, than:

138.05(1)(a) At the rate of $12 upon $100 for one year computed upon the declining principal balance of the loan or forbearance;

138.05(3) A contract to make loans or an evidence of indebtedness may provide for a rate of interest or penalty payable upon the principal amount of an extension of a loan or forbearance or upon any amount in default under a loan or forbearance which shall not exceed the rate allowed in sub. (1) (a).

138.05(4) Any person making a loan for which interest is agreed to be paid at a rate exceeding the rate of $10 upon $100 for one year computed upon the declining principal of the loan shall, at or prior to making such loan, deliver to the borrower a statement, which may be incorporated in a copy of the evidence of indebtedness, setting forth all of the terms of the transaction in clear and distinct language, including:

138.05(4)(a) The rate of interest agreed upon in terms either of simple interest computed on the declining principal balance or of the actual interest cost in money, and

138.05(8)(c) This section does not apply to any loan or forbearance which is made on or after November 1, 1981, or to any refinancing, renewal, extension, modification or prepayment on or after November 1, 1981, of any loan or forbearance, except this section does apply to forbearances occurring primarily for personal, family or household purposes for which the only charge is a penalty or late charge for nonpayment when due.