March 18 Federal regulators are conducting two
investigations into General Electric Co's credit card
business for potential violations of consumer finance laws,
according to a regulatory filing related to the unit's planned
initial public offering.
The credit card business, now named Synchrony Financial,
said it is in talks with the Consumer Financial Protection
Bureau (CFPB) regarding a review of its debt cancellation
products and related marketing practices, according to the
regulatory filing dated March 13.
The consumer bureau, which was created by the 2010
Dodd-Frank law, has long had concerns about consumers' access to
accurate credit information.
The company also said that it notified the CFPB about a
problem with its Spanish-language filing after spotting it as
part of an internal audit. ()
The matter was referred to the Department of Justice (DoJ),
which initiated a civil investigation over a possible violation
of the Equal Credit Opportunity Act, as some Spanish-speaking
customers and customers residing in Puerto Rico were excluded
from certain statement credit and settlement offers, according
to the filing.
There is no assurance that the investigations will not have
a "material adverse effect" on business and results, Synchrony
GE Capital, CFPB and the DoJ could not be reached for
comment immediately outside regular U.S. business hours.
The IPO filing last Thursday was the first step in GE's
long-awaited plan to exit retail finance and reduce its
dependence on its financing arm.
The conglomerate has been reducing its reliance on GE
Capital, its financing arm, which at one point accounted for
almost half of the company's profit. The unit's rising funding
costs during the 2008 financial crisis nearly sank the company.
Last December, GE Capital and CFPB resolved allegations that
CareCredit, its medical credit-card division, failed to
adequately explain loan terms in financing plan for medical and
dental procedures. The company agreed to pay up to $34.1 million
as part of the agreement.
According to the latest filing, resolution of the federal
investigations could include "customer remediation" as well as
civil money penalties and required changes to how the unit
currently conducts its business.
In 2013, CFPB forced American Express and JPMorgan
Chase & Co to refund customers as a result of
investigations into the companies' credit card procedures.