Banks Warn CFPB to Back Off on Scrutiny of Medical Credit Cards

Banks, debt collectors, and other companies said the Consumer Financial Protection Bureau lacks the authority to make specific rules governing medical credit cards and other financial products patients use to help pay health-care bills.

The CFPB, along with the the Treasury Department and the Department of Health and Human Services, in July sent out a request for information on the prevalence of medical payment products in the health-care market, and the potential problems they pose for patients and their families.

But health-care credit cards and other targeted products operate much in the same way as financing products in other sectors, so there’s no need for new rules, trade groups representing banks and debt collection agencies said in comment letters to the CFPB ahead of a deadline last week. Health-care providers groups also warned that overregulating such products could lead to people postponing necessary but expensive procedures.

What’s more, the CFPB doesn’t have the power to bring new regulations for medical payment products, the financial services industry said in its letters.

“The term ‘medical payment product’ is not defined and does not constitute a separate product category in the marketplace. There are simply different options available to consumers to pay for medical care and services just as they pay for any other goods or services in the economy,” the Bank Policy Institute and Consumer Bankers Association said in a comment letter.

The way consumers pay for medical care “has no bearing on” issues like access to health insurance and the coverage that insurance plans provide; high prices set by hospitals and other health-care providers; or chaotic billing practices, the banking trade groups added.

“It is also far from clear that the CFPB has the authority to regulate medical providers in many of the ways it contemplates in this RFI, various press releases, and statements to Congress,” ACA International, a debt collection industry group, said in its letter.

See also: CFPB Hits Medical Debt Collector With $1.68 Million Penalty

The market for medical credit cards has been dominated by three financial companies: CareCredit, a subsidiary of Synchrony Financial; Wells Fargo & Co.; and Comenity, a subsidiary of Bread Financial Holdings Inc., the CFPB said in a May report.

Deferred Interest Dispute

The three federal agencies said they’re looking into how features of medical payment products, such as ballooning deferred interest, can potentially bury people in debt.

Under a deferred interest plan, a consumer can avoid paying interest on a loan for a set period of time, as long as they make minimum monthly payments. If the loan isn’t paid off within the time frame, the consumer is charged all the interest that would have accrued since the original purchase.

But deferred interest payment programs and similar credit products allow people who don’t have the money to pay for a medical or dental procedure out of pocket to get necessary care that insurance may not cover, according to a comment letter from the American Dental Association.

“Not all patients have immediate funds to cover either the full cost or out-of-pocket costs for their treatment, and credit options can bridge this gap to help ensure that necessary care is not hindered by financial constraints,” the ADA said.

Consumer advocates warned the current market for medical payment products is opaque and doesn’t allow people to make informed choices when faced with expensive financing decisions.

“It is not always easy for consumers to assess or compare the true cost of financing with different medical payment products,” the National Consumer Law Center said in a comment letter.

Patients made $1 billion in deferred interest payments on health-care charges from 2018 through 2020, the CFPB said in its report.

See also: Covid Measures Helped Reduce Medical Debts in US, Study Shows

Neighborhood Trust Financial Partners, a nonprofit financial services provider, said the CFPB should strengthen rules around deferred interest products. If the CFPB doesn’t ban them, it should allow deferred interest to be applied only to remaining balances, not the entire purchase, Neighborhood Trust said in its letter.

Neighborhood Trust also called for better disclosures, so people know how much they have to pay each month to avoid interest payments. But the New York nonprofit cautioned the CFPB against going too far.

“Be mindful of overregulating CareCredit and similar products in the near term, to avoid deferred care as an unintended consequence,” Neighborhood Trust said.