Consumers typically learn about medical credit cards, or  related products such as installment loans, from participating providers,  who give information about the product and the available financing  options. One Company Appears to Issue the Majority of Medical Credit Cards

		Market Participants

One company, CareCredit LLC (CareCredit), issues the majority of  medical credit cards, according to available information, although no  comprehensive data source on the industry exists. Market participants with whom we spoke cited three  other banks—Citibank, N.A. CareCredit, Citibank, and Wells Fargo issue  medical credit cards under their own names, while Comenity works with  third-party companies (sometimes called aggregators) or retail networks  that offer and market the product under their own names. Apart from  participants in the medical credit card market, some companies play other  roles related to financing procedures not covered by health insurance. Relationship between Card Companies and Participating Providers

Card companies contract with participating providers to offer financing  products to consumers. Settlements with GE Capital Retail Bank and CareCredit

In December 2013, CFPB announced a consent order with GE Capital  Retail Bank and its affiliate CareCredit. The company also agreed to  make several changes in its practices, including enhancements to  consumer disclosures provided during the application process and on  billing statements immediately prior to the expiration of the promotional  period, enhanced training to providers on making the terms of the credit  arrangement transparent to patients, and enhanced warnings to  consumers about the expiration of the promotional period. In June 2013, GE Capital Retail Bank and CareCredit entered into a  settlement agreement with the New York Attorney General, who had  alleged deceptive enrollment practices and inadequate disclosure of  product terms and conditions. Medical Credit Cards Commonly Offer Revolving Credit with Deferred Interest

The medical credit cards we reviewed in depth resembled conventional  credit cards (offered a revolving line of credit with an established credit  limit) and offered some form of promotional financing (special terms and  conditions valid for a specified period). But if the  balance is not paid in full within the specified promotional period, the  accrued interest is assessed to the account. As seen in table 2, the APR  for consumers who did not pay off the purchase amount before the  promotional period expired varied depending on the product, but our  analysis found that most cardholders had deferred interest products with  an APR of 26.99 percent or more. Although less  common, major card companies we reviewed also offered a promotional  monthly fixed-payment option, which charged a set interest rate (an APR  from 0 to 17.99 percent) during a specified period (from 12 to 60 months). Appendix I: Objectives, Scope, and Methodology

This report examines the (1) participants and (2) products in the  marketplace for medical credit cards. For the purposes of this report, we  used “medical credit cards” to refer collectively to financial products— including revolving credit lines and installment loans—that are designed  specifically to finance health care services not covered by health  insurance. To address these objectives, we conducted a literature review of articles  using the Proquest, PubMed, and ABI/Inform databases using search  terms such as “medical credit card,” “health care credit card,” “healthcare  financing,” and “medical financing” for the purpose of obtaining  background and context surrounding the products. We also  interviewed representatives of two federal agencies, the Bureau of  Consumer Financial Protection (known as CFPB) and the Federal Trade  Commission. We also reviewed the settlement agreements  and related materials resulting from two enforcement actions against  CareCredit, one by CFPB and one by the New York State Office of the  Attorney General.
Why GAO Did This Study

Medical credit cards and related products (such as installment loans) are offered by financial institutions through participating providers to pay for services not covered by health insurance, such as dental and cosmetic procedures, or for veterinary care. Medical credit cards received increased attention after enforcement actions in 2013 against GE Capital Retail Bank in relation to its CareCredit product.
GAO was asked to review the marketplace for medical credit cards and related products. This report describes the participants and products in this marketplace. To address these objectives, GAO conducted a literature review and reviewed websites, product terms and conditions, and other publicly available information. GAO also interviewed staff of, and collected documents from, CFPB, 14 card companies representing a mix of size and type, and organizations that represented participating providers, financial institutions, and consumer interests and were familiar with the medical credit card marketplace. GAO also reviewed settlement agreements between CareCredit and CFPB and the New York Attorney General.

What GAO Found

Multiple entities offer medical credit cards, but according to market participants with whom GAO spoke, CareCredit LLC issues the majority of medical credit cards. In 2013, the company reported 4.4 million cardholders and 177,000 participating providers in its network, the majority of which were dental offices. Several other financial institutions also issue medical credit cards, usually offering their own branded product, but sometimes providing financing for retail networks or third-party companies that offer and market cards under their own names (see table). The marketplace for financing services not covered by health insurance also includes companies that assist providers in offering their own payment plans and websites that largely serve a marketing function by directing consumers to others' products. In 2013, GE Capital Retail Bank and its affiliate CareCredit entered into separate agreements with the New York Attorney General and the Bureau of Consumer Financial Protection (known as CFPB), which had alleged deceptive card enrollment processes, including failure to provide disclosures and inaccurate information given by participating providers to consumers. Both settlements required CareCredit to make several changes to its practices, such as enhancing consumer disclosures.
Medical credit cards from large banks offer a revolving line of credit with an established credit limit—akin to a conventional credit card—with some form of promotional financing (special terms and conditions, which are valid for a specified period of time). The most commonly used financing option is deferred interest, with no interest charged for a promotional period but interest charged retroactively if the balance is not paid in full before the end of the promotional period, usually 6 to 24 months. Among large banks GAO reviewed, as of May 2014, the most commonly used products had an annual percentage rate (APR) of 26.99 percent or more. Alternatively, these banks also offered revolving credit with fixed monthly payments, with an APR of 0 to 17.99 percent. Installment loans or products targeted at consumers with poor credit histories were offered by certain other market participants.

What GAO Recommends

GAO makes no recommendations in this report.