CFPB Announces Healthcare Credit Card Enforcement Action Over Deferred-Interest Financing

Credit Cards CFPB Vendors Enforcement

On December 10, the CFPB released a consent order with a federal savings association, pursuant to which the bank will refund approximately $34 million to more than one million credit card holders who were enrolled in deferred-interest financing for healthcare services. The order does not include a civil penalty. The deferred-interest action is the first public action taken by the CFPB since it promised to scrutinize such products in its October credit card report.

The product at issue typically is offered by healthcare providers who offer personal lines of credit for healthcare services, including medical, dental, cosmetic, vision, and veterinary care. The CFPB alleges that the bank failed to sufficiently train healthcare providers to deliver material information about deferred-interest promotional periods associated with the credit cards, which led to consumers being misled during the enrollment process.  The CFPB further claimed that healthcare providers improperly completed applications and submitted them on behalf of consumers, failed to provide consumers with copies of the credit card agreement, and, where disclosures were provided, those disclosures failed to adequately explain the deferred-interest promotion.

In addition to consumer redress, the order mandates certain terms of the bank’s contracts with medical providers offering the healthcare credit card. For example, the bank must incorporate specific “transparency principles” into its agreements with healthcare providers, and the contracts must prohibit certain charges. The bank also must enhance disclosures provided with the card application and billing statements, and improve training for healthcare providers offering the card. In addition, the order details consumer complaint resolution requirements, and prohibits certain incentive arrangements and paid endorsements. To date, the CFPB has not released the attachments to the consent order, which include, among other things, the transparency principles and disclosures.

The New York Attorney General entered into a similar agreement with the bank earlier this year. Under that agreement, the bank was likewise required to add a set of transparency principles to provider contracts to ensure that card terms were described accurately and to revise promotional interest rate options and other disclosures to better inform consumers’ use of the card.