The Consumer Financial Protection Bureau (CFPB) this week ordered GE Capital Retail Bank and its subsidiary, CareCredit, to refund up to $34.1 million to consumers who were alleged victims of deceptive credit card enrollment.
Sold at doctors’ and dentists’ offices nationwide, consumers who signed up for the CareCredit credit cards thought the program was interest free, however, they were actually accruing interest, at a rate of 26.99%, that kicked in if the full balance was not paid at the end of a promotional period.
“The result can be that the patient is misled into signing up for a very expensive loan,” said CFPB Director Richard Cordray in a statement released Tuesday.
CareCredit offers individuals who enroll in the program personal lines of credit for healthcare services, including dental, cosmetic vision and veterinary care.
While doctors, dentists and other medical providers and their office staff are the primary sellers of the credit card program, the CFPB said in a statement consumers frequently received inadequate explanations of the program’s terms.
“During the course of our investigation, we found that many patients did not receive paper copes of the credit card agreement and instead relied on staff at health-care offices to explain it to them,” said Cordray. “Some staff had received little or no training from CareCredit. Some providers themselves admitted that they were confused about the actual consequences of the deferred-interest terms.”
The CFPB ordered CreditCare to create a $34.1 million reimbursement fund, enabling consumers who may have “wrongly accrued charges” in connection to their card the right to file a claim, which CFPB states will then be assessed by an independent adjudicator.
Additionally, as a result of its investigation, CFPB ordered CareCredit to develop more transparent guidelines for its consumers, such as informing cardholders of the high interest rates that will be applied if the charge is not paid off at the end of the promotional period.
For certain transactions over $1,000, consumers will have to enroll in the program directly through a CareCredit representative, and not through a doctor’s or dentist’s office.
In October, the agency issued a report to Congress on the CARD Act and the credit card market, identifying deferred-interest products as an area of concern.
“Medical debt is already a big problem for many Americans. Poor credit card transparency should not be making the problem even worse,” said Cordray in his statement. “Deferred-interest products can be risky for consumers in the best of circumstances, and today’s action ensures that CareCredit will no longer profit from consumer confusion.”
The CFPB estimates that more than 1.2 million consumers were wronged by CareCredit and could be eligible for money from the reimbursement fund.
Written by Jason Oliva