Deceptive marketing and discriminatory practices by GE Capital Retail Bank (now called Synchrony Bank) have impacted almost 750,000 people, according to the Consumer Financial Protection Bureau (CFPB).
The CFPB has ordered GE Capital to pay $225 million in consumer relief, the largest credit card discrimination settlement the federal government has ever imposed. Fifty-six million will go to about 638,000 people who were victims of deceptive marketing, and $169 million will be awarded to approximately 108,000 consumers who were discriminated against due to national origin.
Announcing the CFPB’s decision, director Richard Cordray said the agency “will continue to take action against marketing tactics that trick consumers into buying credit card products they do not want or cannot use. Consumers also deserve to be treated fairly no matter where they live or what language they speak.”
GE Capital Bank, which adopted the name to Synchrony Bank on June 2, 2014, has its headquarters in Utah and has assets of more than$39 billion. Their store-branded credit cards are carried by consumers across the United States and offered by many merchants. GE Capital self-reported the issue of discriminatory practices to the CFPB in 2012 and a joint investigation by the CFPB and the Department of Justice resulted. The investigation began in December 2013 and concluded in February 2013.
Add-on products deceptively marketed
Five add-on products offering cardholders debt-cancellation services were the heart of the deceptive marketing investigation. The products, Card Security, Account Security, Account Security Plus, Debt Security, and Debt Security Plus, were marketed to consumers as ways to cancel out a percentage of their debt if they lost their jobs, became disabled, or experienced other unexpected events that caused them to be unable to make payments on their balances.
However, telemarketers told people the products would be free if they paid off their balances. This was only true if the account was not being used, or if the balance had been paid in full before the monthly statement was issued. They also did not disclose to customers that they might not be eligible for the products, and charged them anyway. Marketers did not properly disclose that customers were purchasing a product, but made it seems like they were updating their account or claiming a benefit. Salespeople also told folks that the products were only available for a limited time, creating a false sense of urgency. The products’ availability was in fact not limited to any timeframe.
Discrimination against Hispanic populations
GE Capital also made settlement offers to certain customers who were struggling to pay off their balances and bring their accounts into good standing. However, these offers were not made to anyone with a mailing address in Puerto Rico, or any customer who preferred to receive communications in Spanish. This is a violation of the Equal Credit Opportunity Act (ECOA), which says that credit issuers may not discriminate based on race or national origin.
In addition to paying the consumer relief funds in a convenient and timely manner, GE Capital was ordered to end deceptive marketing practices and put a stop to illegal discrimination. They must also pay a $3.5 million penalty to the CFPB Civil Penalty Fund.