Medical credit cards may cause patients to overpay for their healthcare, Democrats warn – WTOP News

NEW YORK (AP) A group of Democratic senators is asking the nation’s consumer credit regulator to take action against medical credit cards like CareCredit, saying the use of these cards can cause patients to pay a lot more for their medical care than they should.

Medical credit cards have historically been used for elective procedures such as cosmetic dentistry, dermatology, vision, and in veterinary clinics. They are useful for patients who cannot pay a medical bill upfront

But lawmakers, led by Sen. Elizabeth Warren, D-Mass, say the interest-deferred features of the cards are confusing and often lead consumers to pay high interest rates after the end of an initial promotional period. They also say the cards are sometimes used in lieu of need-based programs that hospitals and other health care organizations are supposed to apply to patients’ finances before forcing them into debt.

The Consumer Financial Protection Bureau, which oversees consumer financial markets, previously highlighted these issues in a report released in May. The bureau hasn’t taken any action since the report came out, but consumer advocate groups are pushing for the agency to consider writing new regulations for medical credit cards.

Our investigation shows that medical credit cards can pose a significant threat to patient finances. We urge the CFPB to take action to curb this damage, Sen. Elizabeth Warren, D-Mass, wrote to the Bureau. Warren’s letter was also signed by Senator Bernie Sanders, D-Vermont, and Senator Ed Markey, D-Mass.

CareCredit has been around for decades as a popular way for patients to pay for medical bills at doctors’ or dentists’ offices out of pocket. Americans spent $3.7 billion on CareCredit in the first three months of 2023, according to Synchrony Bank, CareCredit’s parent company. Americans have about $12 billion in loans outstanding with CareCredit.

Wells Fargo also has a medical credit card under the name of Wells Fargo Health Advantage.

But what used to be a product only for elective medical procedures has slowly evolved into a credit card that is accepted at major doctor’s offices and hospitals.

CareCredit has long offered customers an interest deferred promotional feature, meaning that a patient would pay no interest on a purchase if it was paid for within a certain period of time, usually 12 months. But if a patient has failed to pay that charge within the time limit, the interest accrued over the last year can be billed to the customer all at once.

The Senators note that about one in four CareCredit customers end up paying interest on their purchase, while one in five Wells Fargo customers pay interest.

The CFPB must take immediate action to protect patients from these shady practices, starting with an end to interest deferred medical credit cards, Warren told the Associated Press.

The senators raise a concern that has been echoed by consumer advocates that CareCredit and Wells Fargo’s expansion into mainstream medical offices could potentially be problematic, as hospital billing and insurance is never a simple process and often what being billed to a patient is not what a patient will ultimately charge. Senators are concerned that patients could charge these cards before the hospital bills are paid.

The Senators are asking the CFPB to potentially look for ways to ensure medical credit cards are used only after insurance and needs-based care have run out without infringing on a patient’s medical privacy rights.

We are also concerned about the prevalence of medical billing errors, which can put patients on the hook for expenses they don’t owe, the senators write.

In a statement, Synchrony Bank said it looks forward to working with the bureau and with Congress on how medical credit cards are being accepted and used.

Protecting consumers is of paramount importance and we are committed to continuing to educate all stakeholders about the fair and transparent way we offer our products,” the bank said.

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