Synchrony Bank Class Action: CareCredit Accused of 'Predatory' Lending

Case Overview: A class action lawsuit has been filed against Synchrony Bank, alleging that CareCredit's high-interest rates violate usury laws and exploit vulnerable consumers.

Consumers Affected: Individuals who used CareCredit to finance medical expenses.

Court: U.S. District Court for the Eastern District of New York, Central Islip

Synchrony Bank has been hit with a lawsuit alleging the company's CareCredit product imposes excessively high interest rates on unsuspecting customers, often during moments of extreme financial distress. 

According to the lawsuit, the bank violates state usury laws, breaches consumer protection statutes, and unjustly enriches the bank at the expense of vulnerable consumers. 

Lawsuit Claims CareCredit Exploits Vulnerable Consumers With High-Interest Loans

Columbia resident S.G. filed the proposed class action lawsuit against the bank after he opened a CareCredit account in 2021 to cover emergency veterinary expenses for his critically ill cat, Pumpkin. When Pumpkin required over $2,000 in medical treatment, S.G. was told CareCredit as the only viable payment option at the veterinary clinic. Under pressure and with few alternatives, S.G. accepted the terms of the loan, despite its extraordinarily high interest rate, the lawsuit alleges.

Over the next two years, S.G. continued to use CareCredit for personal medical expenses, including optometrist visits and chiropractic care. However, the financial strain of the high-interest loan became overwhelming, he alleges. 

According to the lawsuit, the interest rate on S.G.'s CareCredit account reached 32.99%, with penalties for late payments pushing the rate as high as 39.99%. S.G. argues that these rates are not only exploitative but also illegal under state usury laws. If S.G. continues to make only the minimum payments on the original $2,000 loan, he will ultimately pay $7,752 over 14 years.

How CareCredit Works

CareCredit is a credit card designed specifically for medical and veterinary expenses. Consumers are often introduced to CareCredit in high-pressure situations—such as during an emergency room visit or a critical veterinary procedure—where they must quickly decide how to pay for necessary treatments, as the lawsuit explains. Once approved, CareCredit provides a line of credit that covers the immediate medical expenses, which are then paid directly to the healthcare provider.

Synchrony Bank, the issuer of CareCredit, markets the product as a convenient solution for covering out-of-pocket healthcare costs. According to the company, CareCredit is accepted at over 250,000 provider locations and has more than 11 million cardholders. The card is frequently used for copayments, deductibles, and even prescription costs as consumers grapple with rising healthcare expenses, the lawsuit states.

CareCredit's High Interest Rates Allegedly Violate Usury Laws

While CareCredit might seem helpful in the moment, the lawsuit alleges that CareCredit's business model is predatory, targeting consumers when they are at their most vulnerable. With an interest rate fixed at 32.99% for all new accounts, the costs can quickly spiral out of control, especially for those who are already struggling financially. 

Synchrony Bank's quarterly filing for Q1 of 2024 reveals that the company made $911 million from interest and fees on 7.75 million CareCredit accounts in just three months, underscoring the significant profit generated from these high-interest loans.

In late 2023, President Biden’s administration even cautioned Americans about the increasing risks of medical credit cards, issuing a new report that high interest rates can be a real threat to consumers' finances, according to NPR.

The lawsuit claims that CareCredit exploits consumers' desperation, offering them loans with exorbitant interest rates that far exceed the limits set by state usury laws. These laws are designed to protect consumers from unfair lending practices by capping the maximum interest rates that can be charged on loans. 

However, the lawsuit argues that CareCredit's rates violate these protections, placing undue financial burdens on borrowers.

Usury laws in the United States are intended to prevent lenders from charging excessive interest rates on loans, and each state sets its own maximum allowable rate.

The lawsuit alleges that Synchrony Bank's CareCredit product blatantly disregards these laws, charging interest rates that are far beyond what is legally permissible. Also, the case highlights a loophole exploited by some lenders known as the "True Lender Rule," which allows non-bank lenders to partner with banks in states without usury limits, thereby circumventing state laws designed to protect consumers.

Consumers Push Back Against Predatory Lending Practices in Financial Industry

The lawsuit against Synchrony Bank is part of a broader trend of legal actions targeting financial companies for allegedly exploitative practices. Recently, cash advance app Earnin was hit with a class action lawsuit for charging excessive fees and hidden costs, resulting in interest rates that allegedly trap users in cycles of debt. 

Similarly, the app Klover has been sued for misleading consumers about its "zero-interest" cash advances, which plaintiffs argue carry effective interest rates exceeding 1,000% when combined with fees and "tips."

In the Synchrony Bank CareCredit class action lawsuit, S.G. wants to represent consumers from across the US in his allegations the bank violates New York’s Usury and general business laws. He is seeking damages, restitution, disgorgement of profits into a constructive trust, injunctive relief, a declaratory judgment, interest, and costs and attorneys’ fees.  

Case Details

• Lawsuit: S.G. v. Synchrony Bank
• Case Number: 2:24-Cv-05788-Sil
• Court: U.S. District Court for the Eastern District of New York, Central Islip 

Plaintiffs' Attorneys

• Javier L. Merino and Brian D. Flick (DannLaw)
• Jennifer Czeisler, Edward Ciolko and Arturo Pena (Sterlington, PLLC)
• Adam Pollock and Anna Menkova (Pollock Cohen LLP)

Have you used CareCredit or other medical credit cards? Share your experience and thoughts on their interest rates in the comments below.