The Consumer Financial Protection Bureau yesterday issued a report detailing the use of credit cards specifically for healthcare expenses, noting that the popularity of the cards has increased beyond just being used for elective procedures and that consumers may be biting off more than they can chew, ultimately setting them up to fall behind on their payments and end up in collections. The CFPB said that healthcare organizations are offering these products even when consumers may have insurance to cover the cost or be eligible for financial assistance or charity care.
A copy of the report can be accessed by clicking here.
Medical credit cards often offer consumers deferred interest for a period — usually between six and 18 months — and if the balance is not paid by the end of that period, they are charged all the interest that would have accrued. Consumers paid $1 billion in deferred interest payments on $23 billion of healthcare charges between 2018 and 2020, according to the report.
In many cases, some of these consumers would qualify for financial assistance programs or charity care through the hospitals and healthcare facilities, but are being steered into applying for credit cards instead. And other consumers believe they are signing up for a payment plan with the doctor’s office and not for a financial product offered by a third party, according to the report.
Earlier this year, a number of Senate Democrats opened an investigation into medical credit cards, over concerns that consumers may be taken advantage of by locking them into cards with higher interest rates which can only be used for certain types of purchases.
The CFPB’s report appeared to focus on deferred interest that consumers pay and the impact that it could have on their financial well-being.
Choosing to only focus on the negative issues with medical credit cards, Rohit Chopra, the director of the CFPB said in a statement, “Fintechs and other lending outfits are designing costly loan products to peddle to patients looking to make ends meet on their medical bills. These new forms of medical debt can create financial ruin for individuals who get sick.”
