GE Capital arm to pay record credit card settlement

Corrections and clarifications: An earlier version of this story incorrectly described how the settlement compared to others. It is the federal government's largest credit card discrimination settlement.

WASHINGTON — In the largest federal credit card discrimination settlement, the Consumer Financial Protection Bureau and Department of Justice are ordering GE Capital's retail finance business to pay $225 million in relief to consumers harmed by discriminatory practices and deceptive marketing.

The CFPB said Thursday GE Capital Retail Bank, now known as Synchrony Bank, practiced both deceptive marketing and discrimination against Hispanics in several promotions in 2012. The bureau estimates 108,000 Hispanic consumers faced discrimination when they were excluded from two debt-relief offers without their knowledge. CFPB also estimates 638,000 consumers were affected by deceptive marketing practices.

The bureau said GE Capital excluded customers who indicated they preferred to communicate in Spanish and those with mailing addresses in Puerto Rico from certain debt-relief promotions, even if those customers were eligible. That was a violation of the Equal Credit Opportunity Act.

"Here, the scope of the potential harm, as well as the blatant nature of the discrimination is particularly troublesome," said Jocelyn Samuels, acting assistant attorney general for the Justice Department's Civil Rights division.

Samuels said GE Capital reported the discrimination problem to regulators, and has already paid $131.8 million of the $169 million settlement to the consumers harmed by the discrimination.

The company said it regrets its error. In a statement, the bank said its "priority is treating customers fairly and when issues are identified, it is committed to making it right."

The bureau also said GE Capital telemarketers deceived customers when discussing additional credit card products providing for cancellation of some percentage of a customer's debt in case of a hardship, such as disability. Telemarketers falsely said those products were free of charge and failed to tell customers when they were actually buying a product. CFPB Director Richard Cordray said telemarketers would tell consumers they were simply "updating their accounts."

In addition, telemarketers failed to disclose to consumers when they were ineligible for a product, and allowed them to purchase it anyway. They also falsely advertised certain promotions as limited-time offers. GE Capital was ordered to pay $56 million to those affected.

The bank said it discontinued such sales practices in 2012 and has already refunded more than $11 million in fees as a result of its own review. Synchrony spokeswoman Dori Abel said anyone who still needed to be paid would be automatically contacted by the bank.

"This kind of conduct has no place in the consumer financial marketplace," Cordray said. "People deserve to be given clear information, and they deserve to be treated fairly."

CFPB ordered GE Capital to cease all illegal discrimination and false advertising, and forgive debt from accounts that did not receive debt-relief offers. In addition to the $225 million paid to those consumers harmed, GE Capital must also pay a $3.5 million penalty for false advertising. No penalty was imposed for discriminatory practices, as GE Capital self-reported those offenses.

The bureau said this is the sixth time it has taken action on practices surrounding credit card add-on products, resulting in $1.5 billion repaid to consumers.