Senators Warn of ‘Predatory’ Medical Credit Cards

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The high cost of medical treatment has made some areas affected by the economic crisis.

Main idea

  • A group of Democratic senators has sent a letter of concern to the CEOs of Wells Fargo Bank and Synchrony Financial.
  • Hospitals have partnered with banks to push high interest credit cards to people who are desperate for medical help.
  • In the US, a single medical debt can ruin a family’s finances.

When it comes to hospitals, it’s easy to imagine a place where everyone works together to help patients heal and get back to the business of living. Maybe it’s time to rethink that image.

According to a group of Democratic senators, some hospitals have worked with credit card companies to push high-interest loans to those who want to get medical help. Unfortunately, those who are most disadvantaged are affected by this system.

The book

Sent recently by Sen. Elizabeth Warren, Ed Markey, Bernie Sanders, Chris Murphy, and Sherrod Brown wrote to the CEOs of Wells Fargo Bank and Synchrony Financial. While they are not the only financial institutions that offer medical credit cards, they are two of the largest.

In the letter, the senators expressed concern that these medical credit cards could be harmful. After all, after treatment, patients are given “high, high interest medical debt.”

While most Americans are insured, millions are not. Of those who are fortunate to have access to health care, many cannot afford high copays, copays, or uncovered services.

How to make a profit

Here’s how the process works, step by step:

  1. Someone goes to the hospital in need of care but cannot afford the cost of treatment.
  2. The hospital has convinced them to open a medical credit card.
  3. The credit card offers a “no interest” introductory period.
  4. Wanting to get the money to pay the bill, the person applied for the card.
  5. It is approved only for money to pay the hospital bill.
  6. Once they use the card to pay, the card is better. Increasing credit card debt affects their debt-to-income (DTI) ratio, often lowering their score.
  7. If the patient does not have enough cash to pay the balance of the loan in full at the end of the transfer period, they end up with a large debt loan, which carries one of the highest interest rates. high in the industry.

The hospital makes money

Once the patient agrees to take out a medical credit card, the hospital is pre-paid by the card issuing bank. These kickbacks are good for the hospital’s bottom line.

The bank’s profits

High interest rates mean that many borrowers will have their loans hurt sooner bank and cannot exceed their monthly minimum wage. This cycle of credit leads to greater profits for the bank that issued the card.

This is not their first dance with problems

In 2013, the Consumer Financial Protection Bureau (CFPB) ordered Synchrony Financial to return $34.1 million to consumers. According to the CFPB, CareCredit, Synchrony Financial’s medical lending business, harmed consumers by using fraudulent billing practices. credit card.

In December 2022, CFPB hit Wells Fargo with $3.7 billion in penalties for more violence. The CFPB described Wells Fargo and its Health Advantage medical credit card as “one of the most serious offenders among banks and credit unions.”

It was an unfortunate opportunity

The credit reporting agencies recently agreed to remove 70% of the negatives credit card information from credit reports. While this is good news for some consumers, the change will not benefit those who took out a medical credit card because it is considered a credit card, rather than a medical credit card.

It’s a race to see who wins. Will patients and their advocates or banks see profiting from a broken medical system too expensive to give up?

It is important to note that more than 100 million people in the US are suffering from medical debt. The total debt is about $200 billion. At the same time, the US is the only industrialized country in the world that does not guarantee public health for its citizens.

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