Federal regulators on Thursday announced the largest credit card discrimination settlement in history, as the bank formerly known as GE Capital agreed to pay a total of $225 million to resolve claims of discrimination and deceptive marketing.
GE Capital, which has since changed its name to Synchrony Bank, will pay $169 million to about 108,000 Hispanic borrowers that the Consumer Financial Protection Bureau (CFPB) and Justice Department allege were discriminated against.
GE Capital will also pay $56 million to reimburse about 638,000 consumers who faced deceptive marketing practices. The CFPB is fining the bank $3.5 million for these deceptive marketing violations, but not for the discrimination claims because the bank self-reported that problem.
“This kind of conduct has no place in the consumer financial marketplace,” CFPB Director Richard Cordray said Thursday. “People deserve to be given clear information and they deserve to be treated fairly.”
GE Capital ended both the deceptive marketing and discrimination violations in 2012, according to the regulators.
The bank used deceptive marketing practices to entice customers to sign up for credit cards that promised debt cancellation if the borrower fell into hard times, such as the loss of a job or a disability, the regulators claimed. But in reality, many of the customers did not qualify for debt cancellation, despite the claims of their telemarketers.
“In calls with telemarketers, many consumers mentioned that they were retired or disabled, which would mean that they were not eligible for key benefits of the products,” the CFPB said. “Even after hearing this, the telemarketers neglected to tell the consumers that they would not be eligible for key debt cancellation benefits.”
GE Capital also discriminated against hundreds of thousands of Hispanic borrowers, the regulators allege. The bank offered debt forgiveness promotions to 400,000 customers, but neglected to give the same offer to about 108,000 customers who had requested to receive their notices in Spanish or lived in Puerto Rico.
“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,” Cordray said.
“At the Consumer Bureau, we are working diligently to right these kinds of wrongs,” he added. “No one should be excluded from credit opportunities simply because of where they live or the language they speak.”