WASHINGTON The institution formerly known as GE Capital Retail Bank allegedly used deceptive marketing in offering credit card add-on products and blocked Hispanics from accessing certain debt relief programs available to other customers, authorities said Thursday.
The lender, now known as Synchrony Bank after a name change earlier this month, will pay $228.5 million to settle claims brought by the Consumer Financial Protection Bureau and Justice Department. It is the largest settlement ever for a company accused of discrimination in its credit card business.
The Justice Department ordered the bank to pay $169 million to roughly 108,000 borrowers affected by the alleged discrimination. Additionally, the CFPB said the bank must pay a $3.5 million fine and $56 million in relief to about 638,000 consumers who allegedly were the target of deceptive marketing practices.
Jocelyn Samuels, the acting assistant attorney general in the Justice Department's civil rights division, said the joint action is proof that government authorities will remain vigilant in going after fair lending violations. However, it was the bank itself that had reported the discriminatory practices after discovering them.
"We hope the detection of this issue by one of the nation's major credit card issuers will prompt the rest of the industry to take a careful look at the way they structure and publicize offers with benefits to borrowers," Samuels said in a conference call with reporters. "We remain committed to ensure that borrowers who suffer harm based on discriminatory lending practices receive compensation. And we will continue to aggressively enforce the law to protect the rights of all who face discrimination, and to ensure fair and equal access to credit for all."
The $39 billion-asset lender is accused of not offering Hispanics two debt relief services that it had offered other consumers with overdue accounts in recent years. Regulators said GE Capital did not make these offerings available for customers who either preferred to communicate in Spanish or had a mailing address in Puerto Rico. Regulators estimate that the restricted access led to about 108,000 borrowers not receiving debt relief even though they had indicated an interest.
"These consumers never knew they were missing out on anything and thus had no way of recognizing that they were even being discriminated against which often is the challenge in confronting discrimination," said CFPB Director Richard Cordray on the conference call. "At the consumer bureau, we are working diligently to right these kinds of wrongs. No one should be excluded from credit opportunities simply because of where they live or the language they speak."
The settlement calls for GE Capital to pay $169 million in remediation to affected borrowers either though a check, credit or debt forgiveness if it has already written off or sold their debt. Samuels said the bank has already provided more than $131 million of that relief to borrowers because it had previously self-reported the discrimination to the CFPB. Because it self-identified the problem and started remediation on its own, regulators said GE Capital did not have to pay a civil money penalty specifically related to the discrimination violation.
The bank did, however, agree to pay a $3.5 million civil money penalty for the other charge that it used deceptive marketing practices when selling credit card add-on products.
The CFPB said an examination revealed that GE Capital had deceived customers by offering to cancel some of their debt for a life event. But when a customer would call in to inquire about their offer, they were instead sent to a telemarketer who would try to sell them credit card add-on products through various pressure tactics.
"These misleading tactics were compounded by the fact that consumers could not review the full terms of these products before enrolling in them, as the transactions occurred over the phone," Cordray said.
Regulators said GE Capital has stopped selling credit card add-on products over the phone and has begun remediation for roughly 638,000 effected consumers that will extend through the coming months.
This is the third joint enforcement action related to discrimination issued by the CFPB and the Justice Department. The three actions together have resulted in $280 million paid by institutions. It also marks the sixth enforcement action the CFPB has issued related to credit card add-on products, totaling $1.5 billion in remediation for consumers.
"We have been and will continue to be vigilant in taking action together against those who deceive or discriminate against consumers," Cordray said.