How Deferred Interest Credit Cards Are Another Medical Debt Trap

Together, We Can End Medical Debt

One hundred million adults — 41 percent of adults in the U.S. — hold medical debt in some form. This debt often hides among credit card balances, loans from family, or payment plans to hospitals and other medical providers. But wherever the debt “lives,” it can be absolutely devastating to a person’s well-being.

We’re Taking Action

In March 2023, 60+ groups launched a campaign to urge the Biden-Harris administration to take big steps to help millions of people reclaim their lives from medical debt. The campaign also sent two letters — one to the Internal Revenue Service (IRS) and Department of Treasury, and one to the Consumer Financial Protection Bureau (CFPB) — outlining specific actions the agencies can take.

Currently, medical debt is the most common type of consumer debt in collection — accounting for more than $88 billion. That’s why — in April — Community Catalyst requested new rulemakings (the official policy-making process) from the Consumer Financial Protection Bureau on behalf of the coalition to address medical debt.

The first request is to prohibit the reporting of all medical debt incurred for medically-necessary services on credit reports.

The second request is to better protect medical and dental patients from deferred interest credit cards. In particular, we urge the Consumer Financial Protection Bureau to develop a rule that clearly prohibits the marketing of such products through health care providers or in health care settings.

What Are Deferred Interest Credit Cards?

A common “debt trap” can be found in deferred interest medical credit cards. These are credit cards offered through medical and dental providers to finance treatment.

These deferred-interest credit cards promise consumers “no” or “0%” interest during a promotional period. However, if the entire balance is not fully paid off by the end of the promotional period, interest is charged retroactively — starting from the date of the first charge. This even includes interest on portions of the balances that have already been paid off.

These features can become a debt time bomb when people are unable to pay the total balance before the end of the promotional period. The result is significant and unexpected interest charges, calculated at the high rates typical for such cards.

Deferred interest credit cards cause disproportionate harm to low-income consumers, who are less likely to pay off the balance before the end of the promotional period. Marketing complex financial products, like deferred interest credit cards, in a medical setting is also problematic.

Read Our Petitions

Request for Rulemaking Pursuant to the Fair Credit Reporting Act (FCRA) (download the PDF)

Request for Rulemakings Pursuant to the Credit Card Accountability and Disclosure Act of 2009 (the CARD Act) and the Dodd Frank Act (download the PDF)

Read Our Comments

Read our comments to CFPB on the harmful impact of deferred interest credit cards (download the PDF)