Are Fertility Finance Companies as Shady as They Seem?

Fertility finance companies lend women money for in vitro fertilization procedures, and their industry is booming, thanks to the recession, which has made home equity and credit card loans — the most common ways couples pay for expensive fertility treatments — harder to come by. But are the companies, which often partner directly with doctors and health clinics, more hurtful than helpful? The author of this Wall Street Journal article seems to think so.

Fertility finance is "pretty much a recession-proof business, since the biological clock doesn't stop," says the senior vice president of IntegraMed America Inc., a fertility-clinic operator which partners with Springstone Financial LLC and a local bank to finance in vitro pregnancies. The partnership saw their loans jump 41% in 2011. "I have never been more confident about the opportunity we have in front of us," IntegraMed's CEO told investors last week. Their clients seem equally overjoyed: One new mother, who plans on paying off her loan to the company that lent her $5,000 at an interest rate of 7.99% to help cover the $24,000 procedure by her daughter's third birthday, says "you can't put a price" on your kid.

So everyone's happy, and babies are being born, yay! But reporter Jessica Silver-Greenberg implies that the in vitro fertilization bubble is bound to burst, and that many of the partnerships seem less inspired by good intentions than by cold hard cash. First, there's the issue that the loans are usually unsecured and can carry interest rates up to 22%, which is a lot for anyone to handle, especially new parents. Regulators don't track the loans, although firms in the industry estimate that they totaled about $4 billion last year. Hey, regulators, don't you remember a tiny little incident called the subprime mortgage crisis?

Doctors often partner with the lenders, and it appears that many do so for financially-motivated reasons. According to the article, companies tell doctors that the loans will increase patient demand and ask them to promote them on their websites and at the doctors office. One doctor who watched a presentation aimed at convincing him to invest in a financial lending company and offer loans to patients said that it was pitched to him "as a gold mine" for patients who want expensive treatments but can't get loans from banks. Sometimes the clinics actually contact the lenders, because "they have a sense of the number of patients they are missing out on if they don't offer financing," according to the chief financial officer at one fertility-loan company. Lenders say the doctors don't make commission on the loans, but if doctors are investing their own money in fertility-finance companies, isn't it wishful thinking that they won't have ulterior motives when it comes to their patients?

Some doctors say they partner with the fertility-loaners because they want to help their clients as much as possible, especially since bank loans are hard to come by right now. And the WSJ failed to interview any parents who regret taking out in vitro loans: all of the mothers quoted were thrilled that they found a way to finance their pregnancies. But if we've learned something from the past few years, it's to be extremely wary of financial solutions that seem too good to be true, especially those that cater to a desperate clientele.

In Vitro a Fertile Niche for Lenders [Wall Street Journal]