GE Capital Retail Bank Ordered to Pay $34.1M in CareCredit Refunds

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GE Capital Retail Bank has been ordered to pay $34.1 million to consumers who were enrolled in their allegedly deceptive CareCredit credit card program.

In December, the Consumer Financial Protection Bureau (CFPB) announced that it ordered GE Capital Retail Bank and its subsidiary, CareCredit LLC, to refund potentially more than 1 million consumers who signed up for CareCredit credit cards under the belief the cards were interest free. In reality, the cards actually accrued interest that was applied if the balance was not paid in full at the end of a promotional period.

“Medical debt is already a big problem for many Americans. Poor credit card transparency should not be making the problem even worse,” CFPB Director Richard Cordray said. “Deferred-interest products can be risky for consumers in the best of circumstances, and [this order] 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.”

CareCredit provides personal lines of credit for health care services. It is offered by medical providers and office staff as a payment option for their patients. According to the CFPB, CareCredit is sold by more than 175,000 health care providers across the United States. The CFPB began an investigation into CareCredit after receiving complaints from hundreds of consumers.

The CFPB reportedly found that service providers used deceptive enrollment processes to entice consumers into signing up for the CareCredit credit card. Further, many consumers did not receive physical copies of the CareCredit agreements and depended entirely on the verbal explanations provided by the service provider. Many consumers reportedly believed that the cards were interest free and did not realize they agreed to a deferred-interest credit card with a whopping 26.99 percent interest rate.

The CFPB also found that many of the health care staff responsible for explaining the CareCredit terms to consumers were inadequately trained. Some even admitted to CFPB investigators that they were confused by the deferred-interest credit card agreement.

According to the CFPB, since January 2009, consumers who signed up for CareCredit often were given an inadequate explanation of the credit card’s terms. These consumers reportedly incurred significant debt because they did not know how to avoid deferred interest, penalties and fees.

The CFPB has ordered CareCredit to provide $34.1 million in refunds to consumers who signed up for the credit cards without being properly informed about the terms of the CareCredit agreement. In addition, CareCredit must contact most consumers within 72 hours of the initial transaction to explain the product. Consumers making certain transactions of more than $1,000 must be enrolled by a CareCredit representative and not through a health care provider or office staff member.

More than 1 million consumers are potentially victims of deceptive CareCredit enrollment tactics. A copy of the CFPB’s order requiring GE Capital Retail Bank and CareCredit to refund consumers is available here.

GE Capital Retail Bank and CareCredit are not the first to be subjected to penalties by the CFPB. In April, Bank of America agreed to pay $772 million to settle CFPB’s accusations that it illegally charged consumers for a credit card and monitoring service that they didn’t receive. In September 2013, Chase was ordered to pay $309 million to more than 2 million consumers who were charged for fraud monitoring services they didn’t receive. And in 2012, Capital One and Discover were each ordered to pay at least $200 million in refunds to cardholders who purchased certain credit protection products over the phone, under the assumption the services were free.