Health-only credit cards increase financial stress for hospitalized patients with medical debt, according to a newly released Consumer Financial Protection Bureau. (opens in new tab) (CFPB) report.
According to the same study, financial products sold to patients are typically more expensive than other payment methods, including traditional credit cards, with APR rates for cards often reaching 25% or more. The CFPB noted that medical credit card deferred interest claims totaled $1 billion.
While these types of products are marketed to patients as a way to reduce escalating health care costs, they actually reduce access to credit, result in costly and lengthy collection lawsuits, and the potential for bankruptcy. The CFPB said it could go up.
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CFPB Director Rohit Chopra pointed to “fintechs and other lending organizations” that design “high-priced loan products” specifically marketed to hospitals and their patients.
Between 2018 and 2020, patients paid about $23 billion in medical bills using specialty medical credit cards and fixed-rate loans. Medical bills – Over 17 million transactions.
The report comes as financial institutions and technology companies launch more products for medical patients and their families.
“These new forms of health care debt can spell financial ruin for sick individuals,” Chopra said.
Why are medical credit cards a problem for patients?
According to available public information collected by the CFPB, medical credit card and medical installment loan terms include an interest rate of approximately 26.99%, while the average interest rate for standard consumer products is 16%. and much lower.
These products often come with a deferred interest plan, and all accrued interest may become due at the end of the defined period, which is particularly expensive and unaffordable for patients. The CFPB said it could turn out to be something.
The CFPB warned that companies may be discouraged from marketing their products directly to healthcare providers, explaining legally mandated financial assistance programs and interest-free repayment options.
He added that providers may not be able to adequately explain complex terms, such as deferred interest plans, to patients.
2022 poll (opens in new tab) A survey by NPR and health policy research firm KFF found that 41% of Americans have some form of health care debt. And in 2013, I ordered CFPB (opens in new tab) Healthcare finance company CareCredit has decided to create a $34 million reimbursement fund after authorities discovered patients were victims of “credit card fraud tactics.”