New York Attorney General Andrew Cuomo today announced an investigation into predatory health care lending where consumers - especially seniors and vulnerable patients - are being misled about financing terms, causing them to be pushed into debt.
The investigation has found that some health care providers are pressuring consumers into using CareCredit, a health care credit card, through "fast-talking sales pitches" and deceit.
CareCredit often pays rebates to providers based on how much business they charge consumers on CareCredit cards.
The investigation was based in part on hundreds of consumer complaints to the AG's office. Consumers reported that health care providers promised that the credit card had "no interest," when it often carried retroactive interest of more than 25% if not paid in full during a promotional period.
Consumers also were unknowingly charged upfront for services they never received. Their attempts to obtain refunds often were ignored. Meanwhile, CareCredit pays the health care providers in-full within 48 hours of the charge, according to the AG's office.
"Health care debt is the number one cause of individual bankruptcy, and this scheme is contributing to the economic burden being felt by consumers,” says Cuomo, in a statement. “People are being tricked by misleading offers that have them paying for services they never received as well as interest charges they never knew about - and they are ignored and given the runaround when they try to get their money back."
The investigation found that CareCredit charges providers a fee for the right to offer the cards, and then rebates part of the fee based on the amount of money the providers generated through CareCredit sales. The arrangement, plus CareCredit’s payment in full to providers within two days of the charge, creates an incentive for providers to push consumers to use CareCredit rather than other methods of payment. In fact, providers pushed CareCredit over cash.
Cuomo issued subpoenas to 10 providers that promote CareCredit, a product offered by GE Money, a division of General Electric Company, which was subpoenaed for its customer list and other information. Subpoenas also went to: Allcare Dental Management Inc., Buffalo, N.Y.; American Laser Centers, Farmington Hills, Mich.; Aspen Dental Management Inc., East Syracuse, N.Y.; East Syracuse Family Dental Arts, East Syracuse, N.Y.; Laser Cosmetica, New York City; Lifestyle Lift, Troy, Mich.; Northern Lights Chiropractic, Watertown, N.Y.; S & Y Diamond Dental P.C., Brooklyn, N.Y.; Sunshine Dental, Watertown, N.Y.; and Toothsavers, New York City.
The subpoenas seek marketing materials, applications, terms of credit, contracts and rebate agreements, policies and procedures, consumer complaints, and regulatory inquiries.
Several nationwide medical associations, including the American Dental Association and the American Society of Plastic Surgeons, have been asked explain why they endorsed CareCredit and whether they received compensation for doing so. CareCredit is accepted by more than 125,000 health care practices nationwide.
The AG’s Office cited many examples of the types of complaints received regarding the scam, including:
A man went to a dental provider with a toothache and was told he needed $9,000 in work done. He told the practice’s office manager that he had the ability to pay for the service in cash, but he was persuaded to sign up for financing through CareCredit. He ended up having the work done elsewhere, but the full amount of charges was billed to his card, despite receiving no services from the practice.
A woman was told by a dental practice she needed a variety of procedures, and to get them she would have to sign a CareCredit agreement. After only having one $400 procedure done, which she paid for, she received a bill for $2,600. Her attempts to get a refund were rejected by both the provider and CareCredit.
At press time, officials with the companies under investigation or subpoenaed were not available for comment. This story will be updated with any comments from those groups.
