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 (CFPB) and the Justice Department and involves two different sets of allegations. $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. 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. The settlement resolves allegations that the bank excluded Hispanic borrowers from two of its credit card debt-repayment programs. The bank did not immediately return the Associated Press’ calls seeking comment.
“This kind of conduct has no place in the consumer financial marketplace,” said Richard Cordray, director of the Consumer Financial Protection Bureau, in announcing the order. “We will continue to take action against marketing tactics that trick consumers into buying credit card products they do not want or cannot use”. Synchrony consented to the order without admitting wrongdoing.
In addition to refunds for consumers, Capital One was also ordered to pay a $3.5 million penalty to the CFPB.
“The blatant discrimination that occurred here is unlawful and will not be tolerated,” said Jocelyn Samuels, acting assistant attorney general for the civil rights division of the Department of Justice, in a statement. “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.”
The crackdown marks the agency’s sixth enforcement action against a major credit card issuer with refunds totaling more than $1.6 billion.
“Of the $169 million in compensation for discrimination, $138.1 million has already been paid to consumers,” said Jocelyn Samuels, director of the Justice Department’s Civil Rights Division who participated in the news conference announcing the order. “The penalty was the largest levied for credit card discrimination,” she said.
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 their 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.