It might sound like a good idea at the time: You're at the dentist's office, and the receptionist offers you a way to stretch payments for an expensive procedure over many months, apparently with no interest.
But often such payment plans can have surprising costs for patients and can end up putting them in debt, said the Consumer Financial Protection Bureau. On Tuesday, the agency announced that it was ordering GE Capital Retail Bank and its CareCredit medical credit card unit to refund up to $34.1 million to pay customers who it said were victims of deceptive credit-card enrollment tactics over the last several years. More than one million patients who may have wrongly accrued charges on their card could be eligible for reimbursement.
Richard Cordray, the bureau's director, said the agency had received hundreds of complaints about the card and found that many patients who were offered it thought they were signing up for an interest-free payment plan. But, in fact, they were applying for a deferred-interest credit card that had a no-interest promotional period of up to two years. Interest accrued during the promotion at an annual rate of 26.99 percent – much higher than a typical bank credit card, he said. If the balance wasn't paid by the end of the promotional period, the patient became liable for the interest, resulting in "a very expensive loan," he said.
Other similar credit cards are available, but CareCredit is one of the largest in the industry, the bureau said. It is offered by about 175,000 doctors, dentists, vision care and veterinary offices across the country. There are about four million active CareCredit cardholders.
Providers like the cards because they get paid up front, but the cards can get unwitting patients into debt at a time when they may not be fully focused on financial details. "They're not on guard financially," he said. "Their focus is on getting better."
Many patients did not receive copies of the credit agreement, he said, but relied on oral explanations from office staff members who often received little training.
Mr. Cordray said the bureau's order found that CareCredit had engaged in "harmful consumer practices" since January 2009. Under the order, GE Capital Retail bank will provide clear disclosures about CareCredit so customers fully understand the product, and bank representatives will contact most patients within 72 hours to explain the product over the phone. For some transactions over $1,000, patients must enroll directly through a CareCredit representative rather than through a staff member of the doctor or dentist's office. The company must also notify customers when the promotional period is ending.
"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," Mr. Cordray said.
Dori Abel, a spokeswoman for GE Capital, said the company worked cooperatively with the bureau and had committed to providing more education about the card for medical providers and consumers. She said the company had "consistently" seen high customer satisfaction with the CareCredit card along with repeat use among clients.
The bureau said in part because GE Capital Retail Bank cooperated with the bureau, there was no additional fine or penalty imposed.
Here are some additional questions about medical payment cards:
■ How will consumers receive reimbursement?
GE Capital Retail Bank is responsible for notifying consumers that they may be eligible for payment and what the claims process is, the bureau said. Claims will be reviewed by an "independent adjudicator." The consent order is available on the bureau's website.
■ Are all payment options offered in medical offices some sort of deferred credit product?
No. Some doctors and hospitals do offer no-interest payment plans administered by outside contractors to patients who cannot pay their bills all at once. If patients don't pay as agreed, the account goes back to the hospital for possible collection.
■ What should I do if I am offered a payment plan at a dental or medical office?
Make sure you understand the terms of the payment plan, the bureau advises, and insist on a copy in writing so you can review it later.
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