CFPB Takes Action Against Deferred-Interest Medical Credit Card

Following closely on the heels of the CFPB’s recent action against pay day lender Cash America, the CFPB has taken action against medical credit card company, CareCredit. CareCredit, a subsidiary of GE Capital Retail Bank, offers medical credit cards through over 175,000 offices of health care providers such as dentists and vision care professionals. In a consent order issued on December 10th, the CFPB ordered CareCredit to refund up to $34.1 million to more than one million patients who were deceptively enrolled for the medical credit card.

Of particular concern was CareCredit’s “deferred interest” plan ostensibly offering “no interest” or “0% interest” during a promotional period. What patients do not understand is that if they have a balance at the end of the promotional period, interest at a rate of over 26% kicks in retroactively to the date the charges were incurred.

Staff attorney at the National Consumer Law Center, Chi Chi Wu said of the use of such credit cards, “The last thing that vulnerable patients need when faced with expensive medical procedures not covered by insurance is a high cost credit card. It can add hundreds or even thousands more to their medical debt.”

The primary focus of the CFPB’s action deals with deceptive enrollment practices in which the terms of a deferred interest plan are not adequately explained and written copies of the disclosures are not given to patients. As described in Consumerist, “So first you have a situation where the people selling the product don’t necessarily know what it is they’re selling. Then you make it worse by failing to provide these customers with written copies of CareCredit agreement. Thus, these borrowers have only the oral explanations from the person who was not trained to explain the product to begin with.”

CFPB director, Richard Cordray, quoted in Forbes, said of the action, “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.” While the NCLC applauded the action by the CFPB, it is urging the CFPB to go further and issue a total ban on deferred interest credit card plans. NCLC managing attorney, Lauren Saunders, says, “Deferred interest plans are one of the nastiest tricks and traps that remain after the Credit Card Act reformed the worst abuses of the industry. It’s a loophole created by regulations and it can be eliminated by regulation.”

Consumers who are owed a refund will be contacted either by the CFPB or by GE Capital Bank. The order also requires that CareCredit contact its new enrollees within 72 hours, to fully explain the terms of the deferred interest plan.