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CFPB Orders GE CareCredit to Refund $34.1 Million for Deceptive Health-Care Credit Card Enrollment
More than 1 Million Consumers Were Potential Victims of Misleading Practices

WASHINGTON, D.C. – Today the Consumer Financial Protection Bureau 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. At doctors’ and dentists’ offices around the country, consumers were signed up for CareCredit credit cards they thought were interest free, but were actually accruing interest that kicked in if the full balance was not paid 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,” 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.”

CareCredit offers personal lines of credit for health-care services, including dental, cosmetic, vision, and veterinary care. Doctors, dentists and other medical providers and their office staff, such as office managers and receptionists, are the primary sellers of the product, 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.

According to the CFPB order, since January 2009, consumers who signed up for the credit card frequently received an inadequate explanation of the terms. Many consumers, most of whom were enrolled while waiting for health-care treatment, incurred substantial debt because they did not understand how they could have avoided deferred interest, penalties, and fees. The CFPB began investigating CareCredit after receiving hundreds of complaints from consumers. During the course of its investigation, the Bureau found evidence of:

• Deceptive enrollment processes: The CFPB found that service providers misled some consumers during the enrollment process by not providing adequate guidance clearly laying out the terms of the deferred-interest loan. CareCredit’s limited involvement during the enrollment process and lack of oversight and monitoring allowed this deception to continue.

• Inadequate disclosures: Many consumers did not receive copies of the actual CareCredit agreements and instead had to rely only on the oral explanations given by the service provider or office staff. Many consumers were enrolled on the belief that it was an interest-free card, and did not understand that they were actually agreeing to a deferred-interest product with a 26.99 percent interest rate.

• Poorly trained staff: Many staff members in the health-care offices, who were responsible for explaining the CareCredit agreement to borrowers, had received little or no training by CareCredit, and relied only on pamphlets. In interviews with CFPB investigators, some providers admitted that they were themselves confused by the deferred-interest card.

Enforcement Action

Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, the CFPB has the authority to take action against institutions engaging in unfair and deceptive practices. To ensure that consumers harmed by the inadequate disclosures and deceptive enrollment processes are appropriately compensated, and that consumers are no longer subject to these unfair practices, the CFPB’s order requires that GE Capital Retail Bank and CareCredit:

• Create a $34.1 million reimbursement fund: Consumers who incurred charges in connection with their credit cards will be notified by CareCredit that they may file a claim seeking reimbursement. Claims will be reviewed by an independent adjudicator. More than 1.2 million consumers will have access to this independent review process and the reimbursement fund. The company will pay all expenses related to the administration of the fund.

• Enhance consumer disclosures: CareCredit will also be required to enhance the disclosures provided to consumers during the application process and on billing statements. The new disclosures will include improved descriptions of the deferred-interest product, and consumers will be warned in advance when the promotional period is ending. Representatives will contact most CareCredit consumers within 72 hours of the initial transaction to explain the product to them over the phone. In addition, for certain transactions of more than $1,000, consumers will enroll directly through a CareCredit representative and not through the doctor or dentist office representative.

• Improve consumer experience with service providers: CareCredit providers will be required to follow new transparency principles, including mandatory training for staff who market the CareCredit card to consumers. They will also be required to provide plain-language disclosure forms to ensure that consumers receive adequate information before signing up for a card.

In the CFPB’s October 2013 CARD Act Report, it identified deferred-interest products like the one offered by CareCredit as an area of concern that can pose risks for consumers. The interest rate on these cards is often substantially higher than the rate on standard general-purpose credit cards. As a result, for consumers who have available credit on a general-purpose credit card and who cannot repay the entire balance during the deferred-interest period, deferred-interest promotions can sometimes be more expensive than revolving the same balance on their existing card.
Financial Literacy Month
April is Financial Literacy Month. How would you grade your knowledge of personal finance? Over 40% of adults graded themselves a C, D or F. Lack of knowledge can make for painful and expensive financial mistakes. And oftentimes we may know what to do, but we simply don’t do it. For example, over 60% of adults admit to not having a budget. Most likely at some point in their lives the vast majority of those adults heard about budgeting, but they never took action and created a budget. Knowledge without application is useless, so expand and apply your financial knowledge today!

• Set some financial goals for yourself – short-term, mid-term, and long-term. Goals are your motivation for doing a budget.

• Track your spending for a month to see exactly where your money is going, not where you THINK it’s going, or HOPE it’s going.

• Adjust any overspending blind spots you may have.

• Create your budget and stick to it. NFCC agencies can help you create your own spending plan. And websites such as www.mint.com can help you with budgeting as well.

• Make “savings” your budget’s first category and pay yourself first each payday. Automatic deposit is a quick, easy way to regularly save.

Take charge of your finances during Financial Literacy Month!
For A Better Credit Score, Should You Carry A Balance On Your Credit Cards?
A question our financial educators are often asked by people is if it is better for their credit score to carry a balance on their credit cards every month instead of having a zero balance. Actually, that is one of the most popular credit myths – that it’s better to carry a balance. The truth is that the FICO credit scoring company likes that you have credit and that you use it, but the less you owe, the better your score. So carrying a balance will not help your score; in fact, it will hurt it.

Additionally, you may think that owing half of your credit limit – such as $1,000 on a $2,000 credit card limit – is perfectly fine and that you’re playing by the credit scoring rules. However, this is a common mistake that many people make. It may seem perfectly fine to owe half of your available credit line – you’re not over-the-limit and not maxed out – but the rules of the credit scoring game say otherwise. Owing 50 percent or more of your available credit is, to quote FICO, “a score killer.” Many people take a serious hit on their credit score because they’re unaware of how the credit scoring game is played. To have a good credit score, you do need to have credit and use it, but –again – the less you owe, the better your score.
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Money Check Up
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Help For Homebuyers
CCOA’s next free Homebuyer Education class is Saturday, May 3, at Washington County Extension, Fayetteville Sign Up
Credit Counseling 101
Ever wonder what a credit counseling session looks like, or what exactly is a debt management plan? These short videos show you.
Website Updates
CCOA is committed to continually improving our service to you. Several clients have suggested that we add a new feature to our Web site that allows clients to access their quarterly client statements, rather than receive it in the postal mail. We heard you. This year we have been diligently working on creating this new capability for your convenience. Simply go to our Web site at www.CCOAcares.com and click on the “Client Log-In” tab on the top right of our home page.

Your username is your CCOA client number and your password is the primary’s last name plus the last four digits of the social security number.

If you have any questions please email us at ccoa@ccoacares.com or call 479-521-8877 or 800-889-4916.
Credit Counseling of Arkansas, Inc., Credit & Debt Counseling, Fayetteville, AR