GE Capital forced to refund $34.1 million to CareCredit borrowers

The Consumer Financial Protection Bureau (CFPB) announced that GE Capital Retail Bank will be providing refunds that could affect up to 1 million cardholders. At issue is the confusion surrounding deferred interest financing plans which consumer advocates claimed trapped unaware borrowers into high interest credit arrangements.

CareCredit was a popular option for patients who needed a way to finance their medical and dental care. Many doctors and dentists promoted the plans as a way for patients to pay their bill in full and benefit from interest-free financing.

What many borrowers were not aware of is that the interest was only deferred. If they fail to repay the credit balance in full prior to the end of promotional period of 6 to 24 months on average, then they would be charged retroactive interest at a 26.99% APR. This could lead to interest charges in excess of $1000 being added to a customer’s bill overnight.

The CFPB determined that there were deceptive aspects of the enrollment process. Many borrowers were not made fully aware of the retroactive nature of the finance charges if they did not repaid the credit account balances prior to the end of the promotional period.

An investigation found that borrowers were frequently relying on verbal explanations provided by receptionists or other office staff and did not receive hardcopies of their credit contracts. This increased the amount of abuse since many borrowers were not told of the temporary nature of the promotional rate.

CareCredit cardholders who are affected will be notified directly by GE Capital Retail Bank. The bank is notifying current and former cardholders and will be providing refunds to those customers. In some cases a refund may be applied to your current CareCredit account balance. Former customers may receive a check by mail.

CareCredit remains a reasonable option for patients who need to be able to pay off a medical debt as a condition for receiving continuous care. Many physicians will require that former debts are repay before they will be able to continue offering medical or dental care.

If you are no longer receiving care from a certain physician, then you are usually better off to repay that medical debt through a series of monthly payments that may carry no interest at all. If the physician does charge interest in you should calculate whether any savings will be expected by financing the debt. For larger debts medical bill assistance may be able to provide a reduction in the overall bill.

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