New York Attorney General Eric T. Schneiderman announced Monday a settlement with GE Capital Retail Bank and CareCredit LLC, its subsidiary, that requires new protections for consumers who use CareCredit, a health care credit card that can carry an interest rate of higher than 26%.
The agreement requires a "cooling-off" period to give consumers a chance to consider the card’s terms and the treatment plan, a limit to what the provider can charge in advance and transparency requirements to make consumers aware of high interest rates if the charge is not paid off at the end of the promotional period.
GE Capital Retail Bank issues the CareCredit card and contracts with health care providers who offer the card to their patients as a way for patients to finance the cost of treatment. GE pays the health care providers in full within 48 hours of the charge.
The agreement concludes an investigation by the Attorney General's Health Care Bureau into CareCredit. The investigation began after hundreds of consumers complained of various problems related to CareCredit.
“The explosion of medical credit card debt is a major concern for many New Yorkers, particularly low and middle income households and vulnerable seniors,” said Schneiderman. “The problem is made even worse by those who encourage high-pressure sales tactics in our health care settings and companies who charge outlandishly high interest rates. This agreement will help New Yorkers by stopping providers from charging large, upfront fees for future services and from glossing over the huge interest rates associated with CareCredit when promoting the credit card to patients.”
Approximately 65% of CareCredit cardholders apply for the card while they are in a provider’s office. The Health Care Bureau's investigation found that, in this setting, the application process is often rushed and occurs when treatment is set to begin.
Consumers reported being pressured into applying for CareCredit and charged the full amount for treatment in advance of receiving services. In many instances, providers failed to inform consumers of the basic terms of the CareCredit card and represented that CareCredit had "no interest," when it carried retroactive interest of 26.99% if not paid in full during a promotional period.
Other consumers were led to believe that they were signing up for an in-house, no-interest payment plan directly with their provider or a line of credit with 0% interest. Consumers who did complain often encountered difficulty in obtaining refunds.
GE and CareCredit comprise the largest issuer of consumer health care financing in the nation, with approximately 160,000 providers offering it nationwide. In New York, GE and CareCredit have authorized approximately 7,800 providers to accept CareCredit and have issued the CareCredit card to over 535,000 New Yorkers. Dental practices comprise some 60% of CareCredit’s business.
Of the 90% of CareCredit consumers who choose the "no-interest-if-paid-in-full" promotion, about 25% end up paying a 26.99% interest rate, when the promotional period ends. That is because too often consumers are not given clear information about the terms of the financing and how to avoid paying the interest.
The agreement requires CE Capital Retail Bank and CareCredit LLC to:
· Give consumers a critical three-day “cooling off” period, such that no transaction over $1000 should be charged on a CareCredit card within three days of an initial application. For any charge for services or products above $1000 within three days of an initial application, GE Capital Retail Bank and CareCredit LLC will provide an unqualified right to reverse such transactions, even if services are, in fact, rendered.
· Ban charges for services not yet rendered, unless those services are completed, or out-of-pocket costs incurred, within thirty days of the applicable CareCredit charge. If not completed within 30 days, GE Capital Retail Bank and CareCredit LLC will allow consumers to a chargeback for all such services not yet completed.
· Amend the contract with providers to include a set of “Transparency Principles,” to ensure that providers accurately describe the terms of the CareCredit card to consumers, including how to avoid paying deferred interest by paying in full before the end of the promotional period.
· Add a clear language disclosure form to the top of the application packet, informing consumers of the interest rate that will be charged if the promotional period lapses, the right to the cooling off period, and the prepayment ban.
· Pay for and establish an appeals fund for certain consumers who contacted GE to dispute a claim and were denied, and either automatically pay the claim or send the claim to an independent arbiter
· Call consumers within 48-72 hours to confirm the application and any charge.
· Improve the complaint resolution processes. For certain disputes, if the provider fails to produce the signed receipt, disclosure form and signed application, GE Capital Retail Bank and CareCredit LLC will issue a chargeback.
· Maintain standardized procedures for tracking all complaints, and designate a compliance officer to monitor the financing practices and identify and address instances when a provision of the agreement is not being followed.
· Ensure providers who fail to comply with their obligations are disciplined, which may include termination.
· Roll out enhanced training of its providers.
· Not give rebates, compensation, or in-kind services to any provider in exchange for a provider’s success in generating business for CareCredit.
· Not use any paid endorsements to professional associations in any consumer facing marketing or related materials.
The Health Care Bureau estimates that the appeals process may result in refunds or credits of up to $2 million to approximately 1,000 consumers whose complaints to GE or CareCredit were initially rejected. Under the agreement, GE will send out notices to these cardholders, notifying them of their right to appeal, and advising them on the appeals process.