New subprime lending startup will focus on financing health care
Two veterans of the subprime lending industry have teamed up to form a new company that will offer financing of health care services to Americans with impaired credit records.
Covered Care, which plans to partner with medical providers, is launching at a time when both the health care sector and the consumer finance industry have been thrown into turmoil by the coronavirus crisis.
“The COVID-19 pandemic has created a perfect storm for the health care industry in this country. Just as practices are opening their doors again, most lenders are reducing access to credit for the people who most need it,” Ken Rees, the founder and CEO of the lender’s parent company, Covered Holdings, said in a press release Thursday.
Rees is the former CEO of Elevate, a subprime consumer lender based in Fort Worth, Texas. Earlier, he was chief executive of Think Finance, a high-cost lender from which Elevate was spun off in 2014. Think Finance, which got into regulatory trouble with both the Consumer Financial Protection Bureau and the state of Pennsylvania, exited bankruptcy late last year.
Covered Holdings’ co-founder and chief credit officer, Tim Ranney, is a former CEO of the subprime credit bureau Clarity, which was acquired by Experian in 2017.
Covered Care said that it will offer affordable credit, and indicated that it will focus on borrowers with credit scores below 700. It said rates on the loans will range from from 5% to 24.9% and that borrowers have the option of paying off a loan at anytime with no prepayment penalties.
The firm is promising medical providers that it will approve high rates of consumers with marred credit, and that it will provide upfront payments and an ongoing share of profits. To consumers, it is touting instant credit decisions.
“We have a better approach that allows us to extend credit to most applicants while keeping APRs affordable,” Ranney said in the press release. “Our goal isn’t just to approve a few more customers than other providers — our ambition is to approve everyone.”
Synchrony Financial, which operates the CareCredit brand, is among the consumer lenders that specialize in the financing of health care procedures.