Banking and Finance Law Daily Wrap Up, CREDIT, DEBIT AND GIFT CARDS—U.S. PIRG urges CFPB to take note of proliferation of medical credit cards, (Apr 25, 2023)

By Donielle Tigay Stutland, J.D.

In a comment letter to the CFPB, the nonprofit organization cautions the Bureau on medical credit card debt and requests industry guidelines.

Nonprofit U.S. Public Interest Research Group (U.S. PIRG) has sent a comment letter to the Consumer Financial Protection Bureau, responding to the Bureau’s request for information (RFI) regarding consumer credit card markets. In particular, U.S. PIRG addressed the proliferation of medical credit cards and urged the Bureau to take note of concerns with the industry. The letter also suggested that more regulatory guidance is needed for medical credit cards.

Background. In January 2023, the Bureau issued a RFI on the consumer credit market in connection with the Bureau’s biennial review of the industry (see Banking and Finance Law Daily, Jan. 25, 2023). Pursuant to the Credit Card Accountability Responsibility and Disclosure Act of 2009 (CARD Act) the CFPB must conduct a review of the credit card industry every two years and report its findings to Congress. In particular, the Bureau asked: How has credit card product innovation changed since the CFPB reported on the credit card market in 2021?

Comment letter. U.S. PIRG focused on the rise of “medical credit cards,” which are described as financial products offered by health providers to pay for medical expenses. The letter raised concerns with these types of products. First, it was noted that these products are typically marketed and sold by front office staff who are not trained in financial products. Moreover, the letter suggests that consumers should not be asked to make on the spot financial decisions in a medical setting. This can encourage predatory up-selling of unnecessary or unaffordable medical services. Second, the letter raises concerns about fees and interest associated with medical cards. Although medical credit cards often offer interest-free credit for a period of several months, such cards often apply retroactive interest and significant late fees.

The letter pointed to a 2021 PIRG study of bankruptcies in Oregon which showed that the most frequently listed creditor was the issuer of a health-care-specific credit card (CareCredit), followed by big hospital/provider networks.

U.S. PIRG only expects this industry grow, as CareCredit has a relationship with 20 hospital systems to market their medical credit cards and PayZen indicates they are going to be marketing to hospitals as well. U.S. PIRG urged the Bureau to keep tabs of businesses that offer these types of credit instruments, and also requested the Bureau offer guidance to the industry and guidelines for such products.

Finally, U.S. PIRG posed several questions for the CFPB to consider related to medical credit cards, including:

• Is there an implied "trust" when a provider is marketing/offering the credit card in their offices at point of sale, and how might that affect a patient's decision to sign up for medical credit cards?

• What oversight exists to protect patients from unknowingly subjecting themselves to high interest and penalties that occur in these “medical credit card” offerings?

• Are existing laws/regulations sufficient to protect them, or do we need other protections?

• What, if any, additional financial benefit are providers receiving from offering these services that we might not be aware of?

• What kind of medical ethics come into play when health care providers start marketing/offering financial services and can use “free credit” to upsell patients on procedures not covered by insurance?

• What impact will the prevalence of these cards have on the future availability of low or no-interest payment plans that are currently offered by providers?

Companies: U.S. Public Interest Research Group

RegulatoryActivity: CFPB ConsumerCredit CreditDebitGiftCards GCNNews