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CareCredit Ordered To Refund Cardholders $34 Million For Deceptive Enrollment Practices

December 12th, 2013 · No Comments · Credit Cards

by Kristy Welsh

(Last Updated On: January 9, 2018)

CareCredit Ordered To Refund Cardholders $34 Million For Deceptive Enrollment Practices

When you need medical or dental care that is not covered by health insurance, you could be facing an extreme financial hardship. It is especially devastating when you need this care right away, but don’t have the cash on hand to pay for it. That’s when doctors and dentists offices often suggest CareCredit, a form of interest free healthcare financing.

If this sounds too good to be true, that’s because it is.

As reported by Forbes, consumers are routinely misled, as CareCredit is only interest free provided cardholders meet certain terms of the agreement. Unfortunately, there has been no formal system in place for making sure these terms are made clear to consumers, resulting in the Consumer Financial Protection Bureau (CFPB) ordering CareCredit to refund 1 million cardholders a total of $34 million.

What is CareCredit?

CareCredit is subsidiary of GE Capital that issues a healthcare credit card through more than 175,000 doctors’ and dentists’ offices nationwide. It is the largest source of consumer healthcare financing in the U.S., with 4 million active cardholders.

UPDATE: CareCredit is now a subsidiary of Synchrony Financial.

Is CareCredit health insurance?

No, CareCredit is not health insurance. It is a credit card that may be used to finance healthcare services that are not covered by health insurance.

Why is the CFPB forcing CareCredit to refund $34 million to 1 million cardholders?

When consumers apply for CareCredit through their doctors’ or dentists’ offices, they do so solely through the office staff. Unfortunately, these staff members do not always adequately explain the terms of CareCredit financing, as they are not properly trained to do so.

Technically, CardCredit is interest free, but only if cardholders stick to the agreed-upon payment plan set up at the time of purchase. If and when they default on this plan — missing a minimum payment or not paying the balance in full within the allotted timeframe — they are charged interest for the purchase. Note, this is interest on the entire starting balance, not just the balance left at the time of default on the agreement.

In addition to the interest rate not being adequately explained to cardholders, they often are not provided with a copy of the agreement, equipped only with the information that has been shared with them orally.

These are considered deceptive credit card enrollment practices that have cost cardholders millions in unexpected interest fees, thus the enforced refund.

What is the interest rate on a CareCredit card?

If cardholders make every monthly minimum payment and pay off their balance within the agreed-upon timeframe, CareCredit is interest free. However, in the event these payment plans are defaulted upon, interest is applied retroactively on the entire starting balance. Standard interest is 26.99 percent, but it varies depending on consumer credit and other factors.

How long do consumers have to pay off their CareCredit balance?

Payment arrangements vary, with a timeframe agreed upon between cardholders and doctors’ or dentists’ offices at the time of purchase. Options include 6, 12, 18, and 24 month payment plans.

What other measures will the CFPB take against CareCredit?

In addition to refunding 1 million cardholders a total of $34 million, CareCredit must also now start contacting cardholders within 72 hours of card issuance. This way, cardholders will have an opportunity to speak directly with a CareCredit representative to ensure they understand the terms of the agreement. In fact, direct contact will now be an immediate requirement at the time off card issuance for some purchases exceeding $1,000.

Should you apply for CareCredit?

As with any other credit card, CareCredit is only as helpful as your ability to pay off the balance before you start accruing interest.

In the case of regular credit cards, that is within 30 days of purchase. As for CareCredit, that timeframe varies dependent upon your agreement with the doctors’ or dentists’ office. The problem is, these payoff dates seem so far away — between 6 and 24 months — that consumers assume they’ll have plenty of time to get it paid off in time. Unfortunately, that’s not always the case. And unlike regular credit cards, if and when interest kicks in, it’s not just on your unpaid balance, but the entire balance stemming from your initial transaction.

Bottom line, if you can find another means of paying for your doctor or dentist services, by all means do. Cash, of course, is ideal. If that’s not an option, look for a low-interest credit card.

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