U.S. Sens. Elizabeth Warren (D-MA) and Edward Markey (D-MA), among others, reached out to Synchrony Bank and Wells Fargo regarding concerns about their medical credit cards and the potential financial harm they could inflict on patients.
In a letter to the banks, the lawmakers are seeking information to determine the prevalence of medical credit cards to cover healthcare services and the impact they are having on cardholders.
“(T)he current structure of our health care system often requires that patients enter into medical debt in order to access services they need,” the lawmakers wrote. “Within that context, patients – often under duress because of concerns about their medical care – are being pushed into and then locked into medical credit cards despite the availability of alternative payment options that might be more beneficial and offer lower interest rates.”
Medical credit cards are those that can only be used to cover health-related costs at specific partner hospitals or providers. The credit cards are promoted by hospitals, care facilities, and providers to patients who are trying to cover the cost of their healthcare services.
Synchrony Bank, which offers CareCredit, is among the largest issuers of medical credit cards, with more than 12.7 million cardholders and 250,000 providers across the country. Wells Fargo also has their own medical credit card called Health Advantage. Roughly 10 years ago, the Consumer Financial Protection Bureau and several attorneys general found that medical credit card companies were misleading card holders.
“Many medical credit card companies have lured patients with pitches of ‘no interest’ periods ranging from six to 24 months, which are actually deferred interest promotions that are controversial and allegedly inherently deceptive,” wrote the lawmakers. “These promotions tout ‘no interest,’ but actually interest is accruing during the promotional period and will be retroactively charged if the entire balance is not paid off by the end of the promotional period.”
The lawmakers also said that one of the features of some medical credit cards is that the available credit is typically set to the cost of the service. This means that the card is maxed out immediately, damaging cardholders’ credit scores.
“The cards may also adversely impact consumers credit reports because of the way they are treated by credit reporting agencies: the agencies recently agreed to remove 70% of medical debt from credit reports, but these changes will not benefit medical credit card holders because their debt is considered credit card debt and as such is ‘viewed less favorably by the bureaus,’” the senator wrote.
In addition to the two Massachusetts senators, the letter was also signed by Sens. Bernie Sanders (I-VT), Chris Murphy (D-CT), and Sherrod Brown (D-OH).
The lawmakers are requesting information about these medical credit cards by Jan. 12.