GE Capital Retail Bank must pay an estimated $225 million as part of a federal examination of deceptive and discriminatory credit card practices, a federal consumer watchdog said Thursday.
The Consumer Financial Protection Bureau said that GE Capital, now known as Synchrony Bank, must refund $56 million to approximately 638,000 consumers who were subjected to deceptive marketing practices. The firm must pay another $169 million to about 108,000 borrowers excluded from debt relief offers because of their national origin.
The CFPB said the order represents the largest federal credit card discrimination settlement in history.
A deeper dive
According to CFPB, GE Capital engaged in a number of deceptive tactics tied to a debt cancellation service. The service, which was designed to wipe away some of the cardholder's debt in the event of a job loss or some other hardship, was falsely marketed as being free of charge (as long as they paid off the balance on the billing statement) and available for a limited time. It also didn't notify interested customers that they were ineligible for the service.
In addition, the bureau also said that GE Capital didn't offer two promotions to customers with a Puerto Rico address, and to those who preferred to communicate in Spanish. The first promotion offered a statement credit between $25 and $100 to cardholders with balances greater than $700, a credit score below 670, and whose minimum payment due was more than $150. The second promotion offered to waive remaining account balances greater than $200 if qualified customers paid between 25 percent and 55 percent of what was owed.
"This kind of conduct has no place in the consumer financial marketplace," CFPB director Richard Corday said during a press briefing. "People deserve to be given clear information and they deserve to be treated fairly."
CFPB's enforcement action related to credit card add-on products stemmed from an examination conducted between December 2012 and February 2013. The action related to the discriminatory credit card practices resulted from GE Capital’s self-reporting of the issue.
In addition to providing the monetary relief, GE Capital must end the deceptive and discriminatory practices and forgive debts on the accounts denied the promotional settlement offer. It also must work with credit reporting agencies to ensure any negative information resulting from the practices be deleted from cardholders' credit history.
GE Capital, a federal savings bank headquartered in Draper, Utah, provides store-branded credit cards that are sold to consumers by merchants and retailers nationwide.
In December, the bank and its subsidiary CareCredit were ordered to refund up to $34.1 million to consumers for deceptive credit card enrollment tactics.
On the CFPB's radar
The CFPB has made deceptive marketing and credit card add-on products a focus over the last few years, taking action against several financial firms, including Bank of America, Capital One and Discover.
Another prior enforcement against American Express cited that one of the issuer's subsidiaries had unlawfully discriminated against new account applicants on the basis of age.
A CFPB spokesperson said the agency's credit card enforcement actions have collectively resulted in $1.5 billion in restitution so far.
"We will continue to take action against marketing tactics that trick consumers into buying credit card products they do not want or cannot use," Cordray said in a press release issued Thursday. "Consumers also deserve to be treated fairly no matter where they live or what language they speak."
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