GE CareCredit to Refund $34.1M for Deceptive 'Deferred Interest', CFPB Says

GE CareCredit to Refund $34.1M for Deceptive 'Deferred Interest', CFPB Says Consumers who signed up for a credit card to pay for dental, cosmetic, vision, or veterinary care through CareCredit, a division of General Electric, were provided little warning or explanations about “deferred interest” penalties and fees tied to these loans, the Consumer Financial Protection Bureau said Tuesday.
The CFPB is ordering GE Capital Retail Bank and its subsidiary, CareCredit, to refund up to $34.1 million to potentially more than 1 million consumers who were victims of “deceptive credit card enrollment tactics.”
The money will reimburse the more than 1.2 million CareCredit customers who have incurred credit card penalties and fees since 2009. Eligible consumers will be notified by the company.
At doctors’ and dentists’ offices around the country, consumers were signed up for CareCredit redit cards they thought were interest free, the CFPB said.
But they were actually accruing interest that kicked in if the full balance was not paid at the end of a promotional period. Most were not aware of this promotional period provision.
“Medical debt is already a big problem for many Americans. Poor credit card transparency should not be making the problem even worse,” said CFPB Director Richard Cordray. “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 Bureau will not tolerate financial companies that take advantage of patients and their loved ones.”
Doctors, dentists and other medical providers and their office staff, such as office managers and receptionists, are the primary sellers of CareCredit, offering it as a payment option for their patients.
The product is sold by more than 175,000 enrolled providers across the country. There are about 4 million active CareCredit cardholders.
Approximately 85 percent of CareCredit borrowers are placed in a deferred-interest financing plan.
Under this “no interest if paid in full” plan, consumers make monthly payments while CareCredit assesses 26.99 percent annual interest on a consumer’s balance throughout a promotional period, which can range from six to 24 months.
If any portion of the balance has not been paid when the promotional period ends, the consumer becomes liable for all of the accrued interest.
Read the CFPB’s consent order against CareCredit.

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