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Consumer Reports calls on CFPB to enact stronger consumer protections for medical credit cards

Medical credit cards can result in high-interest debt for consumers struggling to pay for needed health care expenses 

WASHINGTON, D.C. – Consumer Reports urged the Consumer Financial Protection Bureau to adopt new rules to protect consumers who use medical credit cards to cover needed health care expenses. In a letter sent to the CFPB, Department of Health and Human Services, and Department of the Treasury, CR highlighted the stories of consumers who’ve been buried in high-interest debt when they were unable to pay off the balance on their medical credit cards after the zero interest promotional period ran out.

“Medical credit cards can offer a helpful lifeline for those who can pay off their bill before interest charges kick in, but many others end up drowning in high-interest charges that sink them deeper into debt,” said Chuck Bell, advocacy programs director for Consumer Reports. “The CFPB should consider new rules to ensure medical credit cards are financially safe for patients who rely on these credit products to pay for the health care they need.”

CR’s letter points out that aggressive marketing of high-cost medical credit cards raises many serious concerns given that millions of Americans struggle to manage their health care expenses and carry a lot of costly debt. Medical debt is already a serious national problem afflicting 100 million Americans (41 percent of the population), according to research conducted by the Kaiser Family Foundation. Medical debt is one of the most prevalent forms of personal debt, with one in five Americans reporting that they have been contacted by a debt collector over an unpaid healthcare bill.

According to the CFPB, 20 percent of Americans have at least one medical debt collection item in their credit reports, and over half of collection items on credit reports are for medical debts. The problem disproportionately affects people of color: 28 percent of African Americans and 22 percent of Latinx people carry medical debt versus 17 percent of white people.

CR’s letter highlights the stories of a number of consumers who shared their experiences with medical credit cards, including those who incurred very large interest rates after missing the deadline to make all payments by the end of the promotional period. Several people noted that they ended up taking on high interest debt by charging needed dental care and hearing aids on medical credit cards because of gaps in their insurance coverage. Patients who find it difficult to manage medical credit card payments can face aggressive debt collection, adverse credit reporting, and medical debt lawsuits and wage garnishments.

Several consumers told CR they had benefited from other types of health care financing provided by hospitals, at lower interest rates.  These plans are generally much less expensive and safer for consumers when they have bills they can’t pay off right away.

CR is urging the CFPB, HHS, and Treasury to investigate ways to ensure that 0 percent or low-cost payment plans can be made widely available throughout the health care delivery system as a default go-to alternative to high-cost credit products that charge interest rates in the range of 25-30 percent. CR’s letter also calls on HHS to investigate ways to expand Medicaid and Medicare coverage for essential dental, hearing and vision services, and to investigate ways to expand insurance coverage or financial assistance for elective health care.

CR’s letter outlines a number of steps that the CFPB should take to better protect consumers who rely on medical credit cards, including:

  • Prohibiting deferred interest on medical credit cards
  • Barring medical credit card providers from placing a charge on an account or issuing funds before a medical procedure is completed or the medical product is delivered, with limited exceptions
  • Reminding credit card companies that patients are entitled to withhold payment based on claims or defenses due to problematic practices by medical providers related to medical credit cards, and that they must conduct a reasonable investigation of such disputes
  • Adopting the requirements of the 2013 Consent Order against CareCredit as regulations, such as requiring patients to apply directly with the credit card company for credit limits over $1,000; requiring training of provider staff; and prohibiting providers from charging for services not yet rendered, with limited exceptions
  • Clarifying that a credit card company violates the Credit CARD Act’s ability-to-pay requirements if it does not have procedures in place to ensure that providers are not providing inflated income amounts or improperly filling out applications for patients with incorrect information
  • Collaborating with the Federal Trade Commission to bring enforcement actions against debt collectors that are collecting or filing lawsuits on unsubstantiated claims arising from medical financial products