A health care credit card issuer has agreed to change the way it promotes and runs its card program, New York state officials said today.
New York Attorney General Eric Schneiderman said CareCredit L.L.C., a unit of GE Capital Retail Bank, is entering into a settlement agreement with Schneiderman’s office.
State officials have not yet posted the settlement agreement online, and representatives from GE Capital and CareCredit were not immediately available to comment on the announcement.
GE Capital is one of many credit card issuers that has set up health care card businesses in recent years. The typical card program offers a low interest rate, or no interest rate, for consumers who can pay off the entire balance within three months to 18 months. After the initial promotional period ends, a consumer may have to pay an annual percentage rate ranging from about 12 percent to about 26 percent, according to CreditCards.com.
Physicians, hospitals and other health care providers — including dentists, chiropractors and veterinarians — have been encouraging consumers to use health care credit cards to fill coverage and savings gaps.
Consumer finance specialists at organizations like Consumers Union questioned whether the health card issuers and promoters were giving consumers enough information about what would happen when the initial promotional rate period ends. Some card programs surprised consumers by applying the regular high interest rate retroactively, to the entire promotional-rate period, when the promotional-rate period ended, the group said.
The New York state attorney general’s office began looking into the matter in August 2010. Officials said at the time that they had issued subpoenas to two card issuers in addition to GE Capital and to 14 dental clinics and non-dental health care clinical that had helped promote the cards.
Officials said they had received hundreds of complaints from consumers about health care credit cards.
The CareCredit cards can charge a rate over 26 percent when their promotional-rate periods end, New York officials said in the announcement of the new settlement agreement.
About 65 percent of CareCredit card holders apply for the card while they are in a provider’s office, and GE Capital gives providers an incentive to offer the card by paying the providers in full within 48 hours after the card holders have put care expenses on their cards, officials said.