GE Capital/Synchrony Bank to Pay $225 million in CFPB Credit Card Discrimination Action

The Consumer Financial Protection Bureau (CFPB) today announced that it is ordering GE Capital Retail Bank, now known as Synchrony Bank, to provide an estimated $225 million in relief to consumers harmed by illegal and discriminatory credit card practices.

The CFPB said it is the federal government’s largest credit card discrimination settlement in history.

GE Capital must refund $56 million to approximately 638,000 consumers who were subjected to deceptive marketing practices. As part of the joint enforcement action by the CFPB and Department of Justice, GE Capital must also provide an additional $169 million to about 108,000 borrowers excluded from debt relief offers because of their national origin.

“Today’s action will provide $225 million in relief to GE Capital credit card customers who were harmed by deceptive marketing or discrimination,” said CFPB Director Richard Cordray. “We 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.”

“The blatant discrimination that occurred here is unlawful and will not be tolerated,” said Acting Assistant Attorney General Jocelyn Samuels for the Civil Rights Division of the Department of Justice. “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.”

GE Capital, which changed its name to Synchrony Bank on June 2, 2014, is a federal savings bank headquartered in Draper, Utah with assets totaling more than $39 billion. GE provides store-branded credit cards that are sold to consumers by merchants and retailers across the country.

The CFPB’s enforcement action related to credit card add-on products stems from a  supervisory examination which was conducted between December 2012 and February 2013. The action related to the discriminatory credit card practices resulted from GE Capital’s self-reporting of the issue to the CFPB, which led to a joint investigation between the CFPB and the Department of Justice.

GE Capital had two different promotions that allowed credit card customers with delinquent accounts to settle their balances by paying off a specific portion of their debt.

• Statement Credit Offer: Customers with balances greater than $700, a credit score below 670, and whose minimum payment due was more than $150 were offered a credit of between $25 to $100 if they paid off their minimum amount due. This promotion ran from March 2010 to March 2012.

• Settlement Offer: Customers with balances greater than $200, a credit score within certain thresholds, four or more payments overdue, and no payments in the past 90 days received offers to waive their remaining account balance if they paid between 25 percent and 55 percent of what was owed. This promotion ran from January 2009 to March 2012.

The CFPB said that GE Capital did 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. This meant that Hispanic populations were unfairly denied the opportunity to benefit from these promotions.

CFPB examiners also identified several deceptive marketing practices used by GE Capital to promote its credit card add-on products. The bank offered five different debt cancellation add-on products: “Card Security,” “Account Security,” “Account Security Plus,” “Debt Security,” and “Debt Security Plus.”

GE promoted these products as providing debt cancellation of a certain percent of the consumer’s balance in the event of certain hardships like involuntary unemployment or disability. The Bureau found that GE Capital’s telemarketers misrepresented these products to consumers by claiming they were free of charge, were available for a limited time when they were permanent products, and failing to disclose that consumers who agreed to the products were making a purchase.

In addition to the monetary penalties, GE Capital agreed to discontinue the discriminatory and deceptive practices. The company must also forgive the debt of accounts that did not receive debt relief offers.

For the customers that did not receive debt relief offers because they preferred to communicate in Spanish or had a mailing address in Puerto Rico, if GE Capital had written off or sold their debt, that debt will be forgiven.