N.Y. AG issues consumer alert on medical credit cards

NEW YORK (Legal Newsline) - New York Attorney General Eric Schneiderman issued a consumer alert Thursday on the risks associated with medical credit cards.

Increasing numbers of healthcare professionals are urging patients to use healthcare financing, like medical credit cards, which were first marketed for cosmetic surgery and other elective procedures about a decade ago. The cards and loans are now being recommended to older Americans experiencing large out-of-pocket expenses for basic care not covered by private insurance or Medicare.

Health providers have a financial incentive to recommend the financing, as it encourages patients to opt for procedures they may not need and ensures the providers are fully paid upfront.

"The explosion of medical credit card debt is a major concern for many Americans, particularly vulnerable seniors and low-to middle-income households," Schneiderman said. "For patients, the financial consequences can be dire. The problem is made even worse by companies that encourage high-pressure sales tactics in our health care settings and companies that charge outlandishly high interest rates."

Procedures and treatments the cards are used for can result in significant debt for patients because they are usually not covered by insurance. Schneiderman said medical credit cards may cause more financial issues than they solve.

In June, Schneiderman's office reached an agreement with a CareCredit, a medical credit card company and a subsidiary of GE Capital Retail Bank. Schneiderman's office alleged CareCredit's application process was rushed, providers typically failed to inform consumers of the basic terms of the cards and patients incurred costly credit charges that were initially mistaken for payment plans. Under the terms of the agreement, consumers were given a three-day cooling off period to consider the card's terms, providers were limited to what they could charge in advance and the company added additional transparency to let consumers know about the high interest rates charged at the end of the promotional period.