GE Capital Retail Bank has agreed to pay $225 million to settle charges that it engaged in a nationwide pattern of discrimination for more than three years by excluding Hispanic borrowers from two of its credit card debt-prepayment programs, the U.S. Department of Justice and the Consumer Financial Protection Bureau said Thursday.
The Justice Department and the Consumer Financial Protection Bureau said in a joint statement that a $169 million settlement, affecting about 108,000 borrowers, has been reached with the Draper, Utah-based bank.
Separately, the Consumer Financial Protection Bureau said the bank must refund an additional $56 million to 638,000 customers who were subjected to deceptive marketing practices.
The Justice Department and the bureau said in their joint statement the Draper, Utah-based bank, which is now known as Synchrony Bank, itself identified and reported the discrimination to the Consumer Financial Protection Bureau, and was proactive in taking steps to provide relief to affected borrowers.
The agencies said the bank has already provided the equivalent of about $131.8 million in relief to about 84,000 borrowers, and following the settlement will provide the remaining $37 million in payments, reductions and waivers to affected borrowers.
The U.S. complaint alleged that from January 2009 to March 2012, GE Capital excluded certain borrowers because of their national origin from the “Statement Credit Offer,” a program that offers eligible borrowers the chance to settle their credit card debt if they paid a percentage of their remaining account balance, ranging from 25% to 55%.
The complaint said that as a result of these exclusions, Hispanic borrowers had higher debt levels and longer periods of debt, and some may have suffered additional consequential economic damages, including increased risk of credit problems, default and repossession; having their accounts closed or “charged-off” and sold to third parties; and other damages, including emotional distress.
“The blatant discrimination that occurred here is unlawful and will not be tolerated,” said Acting Assistant Attorney General Jocelyn Samuels for the Justice Department’s Civil Rights Division, in a statement. “Borrowers have the right to credit card terms that do not differ based on their national origin, and the settlement today sends the message that the Justice Department can and will vigorously enforce the law against lenders who violate that right.”
A spokeswoman for Stamford, Connecticut-based GE Capital Retail Finance, a unit of General Electric Co., said, “We’ve worked cooperatively with the regulators. When we identified the error through our internal audit process, we began remediating our customers because when issues are identified, we’re committed to making it right, and the vast majority (of remediation) has already taken place.”