The CareCredit medical card has been fined by regulators for
deceptive marketing, but it gets high marks from health care
groups. Over 100 professional groups -- including such well-known
ones as the American Dental Association -- endorse the card.
But there's a big asterisk on those endorsements: CareCredit
pays for most of them.
In a regulatory filing Thursday, the credit card company
revealed that it pays dozens of professional societies to convince
their members to pitch the high-interest credit cards to
CareCredit had relationships with 107 professional associations
and other groups as of Dec. 31, 2013. "Of these relationships, 63
were paid endorsements linked to member enrollment in the relevant
program," according to a
filing with the U.S. Securities and Exchange
Professional associations contacted by CreditCards.com defended
paid endorsements, while legal experts said the practice is
problematic, especially in the health care environment.
"I think it's troubling because medical professionals tend to
build up trust," said Jeff Sovern, law professor at St. John's
University. Patients might trust their provider to steer them
into the best deal, without knowing that a paid endorsement
influenced the provider's choice.
"If this leads to poor decision making by the patient, I think
there's a real risk," said Jim Hawkins, law professor at the
University of Houston.
Legal protections bypassed
Protections in the U.S. Truth in Lending Act are designed to help
consumers compare different financing offers. Influencing a care
provider's recommendation via a paid endorsement from a
professional association can help cards avoid the scrutiny of
comparison shopping, Sovern said.
CareCredit has been
cited for faulty marketing practices
by the New York Attorney General's office and by the U.S. Consumer
Financial Protection Bureau. Patients frequently misunderstand the
cards' delayed interest terms and wind up owing hefty surprise
charges, the regulators said.
In a December order, the CFPB barred CareCredit from paying
"kickbacks, rebates, compensation or in-kind services" to medical
offices in return for signing patients up for its cards. However,
it did not prohibit the company from paying professional societies
in return for enrolling medical offices to pitch the card to
Other card issuers, including Wells Fargo and Citibank, offer
medical care credit cards that have not been cited by regulators
for their marketing practices.
CareCredit owner GE Capital refused to comment beyond the
information in the regulatory filing.
The endorsements from professional associations are important to
the medical card's business, the filing states. CareCredit attracts
new health care providers "largely by leveraging our endorsement
from professional associations and health care consultants,"
according to the filing. How much it paid for the endorsements was
At Dec. 31 2013, CareCredit had 149,000 health care provider
offices that agree to provide its cards. At the consumer level, it
had 4.4 million active accounts with total balances of $6.5
billion, according to the filing, with an average debt per customer
of $6,222. CareCredit cards carry rates above 25 percent, which may
be deferred for six months or longer.
GE Capital plans to spin off its consumer financial business,
including store credit cards and CareCredit, into a separate entity
named Synchrony Financial. Uninsured health services including
dental work, hearing aids and veterinary care for pets are among
the most common uses for medical cards such as CareCredit.
Endorsements and the public
While CareCredit uses paid endorsements to market its card to
health service providers, it does not use the endorsements in
marketing materials directed at patients, according to a legal
filing that settled New York State's investigation into the card in
But neither are the professional endorsements a secret from the
public. On its website, the American Dental Association carried a
news announcement dated Jan. 10, 2012 calling CareCredit the only
health care financing company endorsed by ADA Business Resources, a
unit of the ADA. An ADA representative would not discuss the
professional group's business arrangement with CareCredit.
The American Animal Hospital Association, another CareCredit
endorser, said it carefully selects the companies it endorses in
return for royalties, and monitors their performance.
"AAHA is very particular about our Preferred Provider Program,"
communications manager Kate Spencer said in an email response to
questions. "We have a very limited number of these relationships
and we monitor the programs on an ongoing basis in an effort to
ensure our programs are the best option for our members."
Even when an endorsed product is selected carefully, any payment
for the endorsement should be disclosed -- to patients as well as
to service providers, one health care expert said.
"Given the unique nature of medical debt, it is crucial that due
diligence be done by any health-related association offering an
endorsement of a medical credit card," said Mark Rukavina, founder
of a health care business consultant Community Health Advisors and
member of a medical debt and price transparency task force convened
by the Healthcare Financial Management Association.
"Transparency is vital," he said in an email response to
questions, "and it is important for providers and patients, alike,
to know if the association was paid for its endorsement."
Paid endorsements have come under fire in other business areas,
and calls for disclosure of the deals is increasing. Under the
Credit CARD Act, colleges were required to disclose their marketing
arrangements with credit cards, leading to fewer such agreements
and a reduction in money paid to colleges under the agreements. In
December 2013, the Government Accountability Office issued a report
urging colleges to reveal marketing deals
for debit cards and prepaid cards.
In the medical industry, drug companies and medical device
cut payments to health professionals
for promotional speeches, as disclosure requirements -- part of the
2010 federal Affordable Care Act -- approach their effective
Debt collection violation disclosed
Synchrony Financial's filing also disclosed that it discovered,
through an audit of its debt collection operations in 2012, that
some Spanish-speaking customers and customers in Puerto Rico were
excluded from settlement offers and statement credits that were
offered to others. The lapse, a possible violation of the Equal
Credit Opportunity Act, was reported to the CFPB and is the subject
of a civil investigation by the U.S. Justice Department, according
to the filing. The resolution could involve payments to customers
"in addition to what we have voluntarily undertaken," as well as
fines imposed by regulators. The card issuer also said it is in
discussions with the CFPB over the marketing of its debt
cancelation products, which have been the target of fines levied on
other card companies.
GE Capital is the largest store-card issuer in the U.S. and one
of the largest credit card companies, with 62 million active
accounts and $94 billion in purchase volume in 2013.
Medical credit cards: Treatment today, payment