The Consumer Financial Protection Bureau (CFPB) has issued a report detailing the risks faced by Americans who take on medical credit cards and financing plans, with some patients being signed up for such programs without consent.
People turn to medical credit cards or loans provided by their healthcare provider to meet surprise medical expenses in case they do not have sufficient cash, only have limited access to credit, or wish to get treatment quickly. In a hospital, patients are under stress and may extend their trust in the healthcare provider to the referred financial services company.
“I am a senior citizen and went to a [dentist’s] office in my area to have them do a routine check-up on my wife’s teeth. They only did two x-rays, yet I received a bill for $14,000 for services she never received, or we agreed for,” one complaint said. “The [dentist’s] office opened up a credit card in my name in order to pay for these services without my consent. I do not speak good English, and they deceived me of the services we would receive, and I never received any receipts or copies of anything until I received a bill in the mail from the credit card company.”
The report pointed out that many medical credit cards offer people deferred interest or springing interest—terms referring to a time period spanning six to eighteen months.
If an individual who has taken a medical credit card has a remaining balance after the designated promotional period, they can be charged with all the interest that would have accrued since their original purchase date.
Medical credit cards tend to be more expensive than other forms of payment due to higher interest payments. The annual percentage rate (APR) for a typical credit card is around 26.99 percent, which is higher than the mean APR for general-purpose credit cards, which is around 16 percent.
Low Credit Score Vulnerability
CFPB found that between 2015 and 2020, people incurred interest on 20 percent of their healthcare purchases when they used deferred interest cards or loans.Individuals whose credit scores were below 619 were found to have incurred interest more frequently. This may have been because they were likely to have shorter periods before being charged the deferred interest, the report said.
“Patients who should be eligible to receive reduced or free care through a financial assistance program or their insurance plan may instead be signed up for a medical card or loan,” it stated.
Higher Credit Card Debt
CFPB’s report comes as more consumers are falling behind in paying off their credit card and loan payments.During the initial pandemic period, the credit card debt of Americans fell by 17 percent, according to Bankrate. This was partly due to the emergency relief and stimulus programs instituted by governments as well as lower consumer spending.
But during the last quarter of 2022, credit card balances in the country rose by $61 billion to $986 billion, surpassing the pre-pandemic high of $927 billion. By the end of 2022, credit card debts were 20 percent higher than a year back.
A May 1 report by WalletHub estimates that credit card customers will have to pay $33.4 billion in extra interest charges over the next year due to these hikes.
