WASHINGTON (6/20/14)--The Consumer Financial Protection Bureau has ordered GE Capital Retail Bank, now known as Synchrony Bank, to provide approximately $225 million in relief to consumers affected by what it labeled "illegal and discriminatory" credit card practices. The order represents the federal government's largest credit card discrimination settlement in history.
GE Capital must refund $56 million to approximately 638,000 consumers who were subjected to deceptive marketing practices. It must also provide an additional $169 million to approximately 108,000 borrowers excluded from debt relief offers because of their national origin, part of a joint enforcement action by the CFPB and U.S. Department of Justice.
GE Capital promoted five different debt cancellation add-on products, which examiners from the CFPB identified as misrepresenting to consumers by:
Leading consumers to believe they would not have to pay for these products as long as they paid off the balance on their billing statement. In fact, consumers could only avoid the fee in very specific circumstances.
Failing to disclose consumers' ineligibility. In calls with telemarketers, many consumers mentioned that they were retired or disabled, however, the telemarketers neglected to tell the consumers that they would not be eligible for key debt cancellation benefits, and the consumers bought the products without this information.
Failing to disclose that consumers were making a purchase. In many cases, telemarketers made it seem like the consumers were receiving a benefit, updating their accounts, handling other administrative tasks. In these conversations, it was not obvious to consumers that they were buying something and would be charged a fee.
Marketing products as a limited time offer. Many customer service representatives falsely told consumers that these debt cancellation products were a "limited time offer" while nothing about the availability of these products was limited.
The action related to the discriminatory credit card practices resulted from GE Capital's self-reporting of the issue, which led to a joint investigation between the CFPB and the Department of Justice. GE Capital offered two promotions allowing credit card customers with delinquent accounts to settle balances by paying a specific portion of their debt.
The CFPB said these offers were not extended to any customer who indicated they preferred to communicate in Spanish or had a mailing address in Puerto Rico, even if the customer met the promotion's qualifications. This meant that Hispanic populations were unfairly denied the opportunity to benefit from these promotions.
Such discrimination is in direct violation of the Equal Credit Opportunity Act, which prohibits creditors from discriminating in any aspect of a credit transaction on the basis of characteristics such as race and national origin.
The $225 million enforcement action stems from a CFPB examination conducted between December 2012 and February 2013. The Bureau has ongoing supervisory authority over GE Capital and will continue to conduct examinations of GE Capital to ensure its compliance with federal consumer financial law.
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