GE Capital To Give Back $225 Million To Consumers For Bad Credit Card Practices

GE Capital (noSynchrony Bank) is the bank behind many store-brand credit cards offered by the nation's largest retailers. (Misfit Photographer)

GE Capital (noSynchrony Bank) is the bank behind many store-brand credit cards offered by the nation’s largest retailers. (Misfit Photographer)

One of the nation’s largest credit card companies, GE Capital (which changed its name to Synchrony Bank a couple weeks back) has agreed to the largest credit card discrimination settlement in U.S. history and will fork over a total of $225 million in relief to around 750,000 consumers for illegal and discriminatory credit card practices.

The deal is the result of enforcement actions by the Consumer Financial Protection Bureau and the Justice Dept. and involves two different sets of allegations.

Deceptive Marketing

$56 million of the settlement will be refunded to approximately 638,000 GE Capital customers who the CFPB alleged were affected by the card company’s deceptive marketing of add-on products and services.

The CFPB took issue with the way GE sold five different debt cancellation add-ons: “Card Security,” “Account Security,” “Account Security Plus,” “Debt Security,” and “Debt Security Plus.”

These products were sold as a way for cardholders to cancel a portion of their debt in the wake of certain hardships like involuntary unemployment or disability.

According to the CFPB, GE Capital misled consumers about these programs in four ways:

• Marketed the product as free of charge: Telemarketers led consumers to believe they would not have to pay for these products as long as they paid off the balance on their billing statement. But the CFPB says cardholders could only avoid the fee in very specific circumstances, such as if the account was not in use or if the customer had paid off the balance prior to GE Capital issuing its monthly billing statement.

•Failed to disclose consumers’ ineligibility: Telemarketers allegedly misled cardholders who were retired or on disability into believing they were eligible for the program when they were, by the products’ rules, ineligible for all benefits. These consumers were then buying a service they could never actually use.

•Failed to disclose that consumers were making a purchase: Again, those pesky telemarketers… This time they failed to make it clear that consumers were purchasing a product, instead making it seem like the products were a new benefit or an update to their accounts.

•Marketed products as a limited time offer: GE Capital reps lied to consumers that these debt cancellation products were a “limited time offer,” giving them a false sense of urgency that led some to enroll when they would not have otherwise.

Discriminatory Credit Practices

For several years, GE Capital offered a pair of promotions for customers with delinquent accounts — one that offered a statement credit of between $25 to $100 for certain delinquent cardholders who paid off their minimum amount due; and one that waived a customer’s remaining account balance if he paid between 25-55% of the total amount owed to GE Capital — but the CFPB says that the company deliberately chose to not extend these offers to any customer who indicated that they preferred to communicate in Spanish or had a mailing address in Puerto Rico, even if the customer met the promotion’s qualifications. These customers did not even receive information in English about these programs.

Thus, the entire Spanish-speaking segment of GE Capital’s customer base was denied access to these promotions that could have lessened their debt.

The CFPB says this is a 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.

And so, GE Capital will pay out a total of $169 million to about 108,000 borrowers who were excluded from debt relief offers because of their national origin or choice of language.

“The blatant discrimination that occurred here is unlawful and will not be tolerated. Borrowers have the right to credit card terms that do not differ based on their national origin, and the settlement today sends the message that the Justice Department can and will vigorously enforce the law against lenders who violate that right,” said Acting Assistant Attorney General Jocelyn Samuels for the Civil Rights Division of the Department of Justice.

Affected cardholders do not need to take any action to obtain the relief called for in the settlement. Those who still have GE Capital credit cards will receive a credit to their accounts or a check; some may have already received this credit.

Those who no longer have credit cards with GE Capital will receive a check in the mail or have charged-off balances reduced by the amount of the relief. If the relief is greater than the consumer’s existing balance, the consumer will receive a check for the excess.