The Consumer Financial Protection Bureau (CFPB) has ordered medical financing company CareCredit, an arm of General Electric, to pay $34.1 million for providing inadequate disclosures and using deceptive enrollment practices. The funds will help reimburse more than 1.2 million CareCredit customers who incurred credit card penalties and fees since 2009.
The CFPB says patients who signed up for a credit card to pay for braces or eye surgery through CareCredit were not informed of the steep fees associated with the loans and subsequently accumulated thousands of dollars in debt. It maintains that CareCredit, when enrolling customers, depended on doctors, dentists, and receptionists to explain agreement terms. Many patients believed they were signing up for an interest-free loan or an in-house payment plan with their physician, when nearly 85 percent of patients were actually signing up for deferred-interest financing. Consumer groups have accused this type of credit product of carrying abusive terms.
Patients under the financing plan made monthly payments, and CareCredit assessed 26.99 percent annual interest on their balance during a six-to-24-month promotional period. After that, any balance left unpaid was subject to accrued interest. The consent order requires CareCredit to create new disclosures, including a detailed description of the deferred-interest product, and provide consumers with advance notice of the promotional period's expiration. Patients also must be enrolled directly through a CareCredit representative, not a doctor or dentist's office staff, for transactions over $1,000.