Feds scrutinize medical credit cards sold by dentists and doctors

The CFPB warns consumers about pushy medical credit cards, citing unclear terms, deferred interest, and pressure from healthcare providers - UnSplash +

A new form of medical debt can create financial ruin for anyone who gets sick

The Consumer Financial Protection Bureau (CFPB) is alerting consumers not to jump at any of the new “medical credit card” -- financing options that some dentists, doctors, and hospitals are starting to push. And the agency indeed thinks these providers are being a bit pushy. 

In a recently published update, the CFPB suggests that the terms of those deals are a little more than most consumers understand and that healthcare providers haven’t done a good job explaining the terms of promotions associated with the cards. 

The three that gripe the agency the most are: 

  • How interest in those promotions get deferred, leaving patients unclear as to the fact that they pay the balance by a certain date, and 

  • The muddiness of when payments would be allocated to their balances. Are the monthly payments going toward the promotional balance or the regular balance? 

  • The pressure to sign up: Some patients felt pressured by healthcare providers to sign up for a credit card while they were getting treatment.

“At one entity, examiners identified a significant number of consumer complaints regarding how dentists and other healthcare providers promoted, offered and sold medical credit cards to consumers,” the CFPB’s Supervisory Highlights report said. 

Then, there’s the potential problem of misuse. When a patient is signed up for a medical credit card, their card can be used again for medical services until they reach their credit limit – just like if it was a credit card for Lowe’s or Target.

Big business = big problems

The CFPB said that, currently, medical credit cards are primarily offered through three financial companies: CareCredit, a subsidiary of Synchrony Financial; Wells Fargo; and Comenity, a subsidiary of Bread Financial.

But they all play to different consumer needs. CareCredit can be used for a wide range of medical costs, from basic services to elective procedures.

Wells Fargo offers the Health Advantage Card in partnership with medical providers that provide a wide range of medical services, including audiology, dental, veterinary, and vision. However, Comenity’s Alphaeon Credit Card can only be used to cover the cost of certain elective procedures. 

The angles that these medical finance companies are playing may be new, but the problem with these types of medical payment isn’t. In fact, from 2018 to 2020, the CFPB reports that American consumers paid out $1 billion in deferred interest payments on healthcare credit cards and loans to pay for everything from medications to emergency room visits to dental and vision.

“Fintechs and other lending outfits are designing costly loan products to peddle to patients looking to make ends meet on their medical bills,” said CFPB Director Rohit Chopra. “These new forms of medical debt can create financial ruin for individuals who get sick.”

These card companies being watched like a hawk

The CFPB released the report after notifying healthcare providers last year that it would probe the way they offer medical credit cards to patients as part of its efforts to protect consumers. 

And the agency has solicited help, too. In an effort to get a better grip on what’s going on, the CFPB said last year that it planned to triple-team these finance companies with assistance from the Treasury Department and the Department of Health and Human Services and the Treasury Department.

What the examiners want from these finance companies is to have good processes for managing their relationships with healthcare providers who talk to patients about these credit cards. The trio of agencies plan to keep checking how well companies oversee these healthcare providers and will also look at the incentives given to patients to sign up for specific credit cards and the marketing materials used.

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