A group of Senate Democrats, including Sen. Elizabeth Warren [D-Mass.] and Sen. Sherrod Brown [D-Ohio], the chair of the Senate Banking Committee, have opened an investigation into medical credit cards and the “potential harm they may inflict on patients.” The Senators sent letters to Synchrony Financial — which offers CareCredit — and Wells Fargo, looking for more information about how pervasive use of the cards is, the terms consumers receive when using the cards, and how many consumers become delinquent or default on the cards.
A copy of the letter can be accessed by clicking here.
The concern from the Senators is that consumers are being taken advantage of by being locked into terms that are worse than traditional credit cards. The interest rate on a CareCredit card can be as high as 26.99%, compared with an average credit card interest rate of 16.27%, according to the letter. CareCredit has as many as 13 million customers, through its partnerships with different healthcare organizations nationwide. “… patients – often under duress because of concerns about their medical care – are being pushed into and then locked into medical credit cards despite the availability of alternative payment options that might be more beneficial and offer lower interest rates,” the Senators wrote in their letter.
The limits on medical credit cards are often set to the cost of the service being provided, and are only able to be used for specific purposes at specific organizations, limiting the choices that consumers have, the Senators pointed out in their letter.
Consumers also might be lured into signing up for cards at a time when they are not fully capable of assessing the risks and shopping around for the best offer, while “no interest” periods that run as long as 24 months are “actually deferred interest promotions that are controversial and allegedly inherently deceptive,” the Senators wrote.
The two card issuers were tasked with providing information about the volume of cards they have originated, details about the average balance, interest rate, and repayment histories, and how the delinquency rate on their their medical card portfolios compares to the rate on their overall portfolios.
