Financial companies work with healthcare providers to sign patients up for specialty credit cards and other targeted financing products

The Consumer Financial Protection Bureau (CFPB) has published a report on high-cost specialty financial products, such as medical credit cards, that are sold to patients as a way to alleviate the growing costs of medical care. Patients are typically offered these products in a medical provider’s office even when their insurance may cover the procedure or they qualify for a hospital’s reduced or no-cost financial assistance program.

The report finds that these specialty products are typically more expensive for patients than other forms of payment, including conventional credit cards, with interest rates often reaching above 25%. These products can add, instead of remove, the financial stress that comes with medical bills, including decreased access to credit, costly and lengthy collection litigation, and an increased likelihood of bankruptcy.

“Fintechs and other lending outfits are designing costly loan products to peddle to patients looking to make ends meet on their medical bills,” said CFPB Director Rohit Chopra. “These new forms of medical debt can create financial ruin for individuals who get sick.”

Financial institutions and financial technology companies are generating a growing number of financing products for patients and their families. According to available public information, the financing terms for medical credit cards and medical installment loans include interest rates significantly higher than traditional consumer credit cards, 26.99% to 16%, respectively. These products often have deferred interest plans, with all accrued interest potentially becoming due at the end of a defined period, which can prove especially expensive and unaffordable for patients.

People used specialty medical credit cards or loans with deferred interest periods to pay for almost $23 billion in healthcare expenses for more than 17 million medical purchases from 2018 to 2020. They also paid $1 billion in deferred interest. These payment products are used for a wide range of basic medical care, including emergency room visits, medications, and lab work, as well as for dental and vision visits and treatment. The payment products may cover medical bills as low as $35 and as high as $40,000.

The growing promotion and use of high interest medical cards and installment loans can create a significant financial burden for patients, and deter them from seeking needed healthcare in the future. In its research, the CFPB found the following:

• Medical financing companies market their products directly to healthcare providers: Financial firms market primarily to hospitals and other healthcare providers and give them marketing training and promotional materials to use when offering the products to patients. The incentives financial firms market to healthcare providers include the promise of cost savings, payments within a few days, administrative ease, and minimal financial risk. Healthcare providers may be disincentivized to explain legally mandated financial assistance programs or zero-interest repayment options before offering these products to patients.
• Patients need guidance on terms and risks: While medical financing companies service the credit cards and loans, healthcare providers are the ones that offer the products to patients as well as disclose the terms of the products. Healthcare providers may be unable to adequately explain complex terms, such as deferred interest plans, to patients. Healthcare providers may rely solely on marketing materials and training that financing companies provide to them at no cost.
• Patients can get stuck with ballooned deferred interest and lawsuits: The CFPB found that over the past decade, purchase amounts as part of deferred interest promotions have decreased in all purchase categories except in the category of medical care. This may be because medical debt is not easily anticipated, and the costs are not known until after services are rendered. Additionally, financing medical debt on a credit card may increase patients’ exposure to extraordinary credit actions that healthcare providers would typically not pursue. For example, there can be a greater incentive for creditors to pursue lawsuits because unlike many healthcare providers, creditors can pursue a debt’s principal plus interest and fees.

This report builds on CFPB’s prior work on medical billing and collections, such as work to protect against unlawful nursing home debt collections and work to bring to light the effects allegedly unpaid medical debt has on military families.

To learn more about the CFPB’s medical billing and collections work, including regulatory guidance, research reports, and consumer education blog posts, visit the CFPB’s medical debt website.

Read the CFPB’s Medical Credit Cards and Financing Plans.

Consumers can submit complaints about medical credit cards and installment loans and about other financial products or services by visiting the CFPB’s website or by calling (855) 411-CFPB (2372).

Employees who they believe their company has violated federal consumer financial protection laws are encouraged to send information about what they know to whistleblower@cfpb.gov.