The CFPB Announces Its Largest Credit Card Discrimination Settlement Ever

GE Capital discriminated against consumers who indicated they preferred speaking in Spanish, and deceived customers when selling credit card debt relief products, the Consumer Financial Protection Bureau alleged on Wednesday. The firm was ordered to pay $225 million to impacted consumers to end two separate enforcement actions brought by the Department of Justice and the CFPB.

The company’s customer service agents communicated with consumers who were late on bills, offering credits or settlement offers, the CFPB said. Some were offered a $25 or $50 credit for making the minimum payment; others were offered a chance to have their balance waived if they paid part of the balance, with offers ranging from 25-55% of what they owed. Spanish speakers were systematically excluded from the offers, the CFPB said.

“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,” the CFPB said. “This meant that Hispanic populations were unfairly denied the opportunity to benefit from these promotions. Such discrimination is in direct violation of the Equal Credit Opportunity Act.”

GE Capital did not immediately respond to requests for comment.

The CFPB’s order said GE Capital “self-identified and reported” that it had excluded cardholders with “Spanish-preferred” indicators on their accounts. GE had disclosed the probes in filings with the Securities and Exchange Commission in March.

As part of this settlement, GE Capital was ordered to pay $169 million to 108,000 consumers excluded from the debt relief offers. It’s the largest credit card discrimination settlement in the CFPB’s short history.

“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 is often the challenge in confronting discrimination,” Richard Cordray, CFPB director, said. “No one should be excluded from credit opportunities simply because of where they live or the language they speak.”

The CFPB also said the firm used unfair sales tactics to trick consumers into signing up for debt protection services with names like “Card Security,” “Account Security,” “Account Security Plus,” and “Debt Security.” The fee-based product promised to cancel consumers’ debts if they ran into financial trouble because of job loss or health problems. Telemarketers led consumers to believe the product was free, the CFPB said. Some also took fees from consumers who were ineligible for debt cancellation, such as those who were already unemployed. GE was ordered to pay $56 million to 638,000 consumers who were “subject to deceptive marketing practices,” the CFPB said.

The news comes just days after GE Capital completed the spinoff off its credit-card-issuing arm, now called Synchrony Financial, with plans to hold an initial public offering soon. GE Capital will still retain 80% ownership of Synchrony.

GE Capital/Synchrony is among the largest credit card issuers in the world, chiefly through retailers’ store-branded cards. The firm handles credit cards for major retailers like Walmart and Gap, and took in a reported $44 billion in revenues last year.

Current GE Capital/Synchrony consumers impacted by the enforcement action will receive a credit on their bills. Consumers who no longer hold accounts will receive a check in the mail. GE Capital/Synchrony was also ordered to pay a $3.5 million penalty to the CFPB. The penalty is for the deceptive marketing practices, but not for the discrimination charges because the company self-reported the issue.

This announcement follows a similar settlement between the CFPB and GE Capital in December, when GE agreed to refund $34 million to consumers of its health costs credit card product, GE CareCredit, which was marketed in doctors’ and dentists’ offices around the country. The CFPB accused GE Capital of deceptive marketing around the card; the firm did not admit or deny those allegations.