Progressive Senators Sound Alarm Over Rise of 'Predatory' Medical Credit Cards

A group of progressive senators raised alarm this week over a pernicious outgrowth of the United States' for-profit healthcare system: medical credit cards.

In a letter to the chief executives of Wells Fargo and Synchrony Financial—two large issuers of medical credit cards—Sens. Elizabeth Warren (D-Mass.), Ed Markey (D-Mass.), Bernie Sanders (I-Vt.), Chris Murphy (D-Conn.), and Sherrod Brown (D-Ohio) expressed concern that "given the circumstances in which these cards are used, medical credit cards could be predatory to patients seeking medical care and leave patients stuck paying higher costs with 'hefty, high-interest debt.'"

"The concern here is the current structure of our healthcare system often requires that patients enter into medical debt in order to access services they need," reads the letter, which was made public this week. "Within that context, patients—often under duress because of concerns about their medical care—are being pushed into and then locked into medical credit cards despite the availability of alternative payment options that might be more beneficial and offer lower interest rates."

By contrast, medical credit cards often come with high interest rates following so-called "no interest" periods that banks deceptively use to lure in customers who are desperate to pay for costly medical treatments. In 2013, the Consumer Financial Protection Bureau (CFPB) ordered CareCredit—Synchrony Financial's medical credit business—to refund up to $34.1 million to "consumers who were victims of deceptive credit card enrollment tactics."

Last month, the CFPB hit Wells Fargo—which offers a medical credit card named Health Advantage—with $3.7 billion in penalties for a slew of abuses and called the institution "one of the most problematic repeat offenders of the banks and credit unions."

Crain's Chicago Business recently reported that "as healthcare costs and insurance deductibles rise, more hospitals in Chicago and around the country are teaming up with banks to market medical credit cards and other loans to patients who lack the insurance or funds to pay for care."

"Hospitals that convince patients to take medical credit cards get paid upfront by banks at a time when unpaid bills are straining their budgets. Lenders, for their part, see an opportunity to capitalize on the growing gap between the cost of medical care and what many Americans can afford," the newspaper continued. "Patients who take the card get money to pay for care, solving a short-term dilemma. But a quick decision made in a high-stress situation can create long-term financial problems. Patients who can't drum up the cash to pay off the initial balance within an introductory period end up with hefty credit card debt that carries some of the highest interest rates in the industry."

More than 100 million people are saddled with medical debt in the United States, collectively owing upwards of $200 billion.

Last year, Kaiser Health News spotlighted the story of Cheyenne Dantona, whose situation is appalling but increasingly common in the United States, where obtaining lifesaving treatment often entails financial ruin:

Dantona, 31, was diagnosed with blood cancer while in college. The cancer went into remission, but when Dantona changed health plans, she was hit with thousands of dollars of medical bills because one of her primary providers was out of network.

She enrolled in a medical credit card, only to get stuck paying even more in interest. Other bills went to collections, dragging down her credit score. Dantona still dreams of working with injured and orphaned wild animals, but she's been forced to move back in with her mother outside Minneapolis.

"She's been trapped," said Dantona's sister, Desiree. "Her life is on pause."

"The cards may also adversely impact consumers' credit reports because of the way they are treated by credit reporting agencies: the agencies recently agreed to remove 70% of medical debt from credit reports, but these changes will not benefit medical credit card holders because their debt is considered credit card debt and as such is 'viewed less favorably by the bureaus,'" the lawmakers wrote.

"Banks have identified medical credit cards as a lucrative opportunity to profit off of the worsening crisis of patients who are unable to afford their medical care," the lawmakers continued, demanding that the bank executives provide information about their medical credit card businesses such as how many accounts are in collections and how many healthcare providers they have partnered with.

"As we work to reform our healthcare system so no individual faces medical debt," the senators added, "we remain concerned about circumstances that serve only to exacerbate financial harm of unaffordable healthcare."

Sanders, a letter signatory and the incoming chair of the Senate Health, Education, Labor, and Pensions Committee, has decried the "very concept" of medical debt, arguing it "should not exist."

During his 2020 presidential campaign, Sanders offered a proposal to wipe out existing medical debt in the United States.

"In the wealthiest country in the history of the world," the senator said at the time, "one illness or disease should not ruin a family's financial life and future."