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 business, now named Synchrony Financial, said it was in
talks with the Consumer Financial Protection Bureau (CFPB)
regarding a review of its debt cancellation products and related
marketing practices, according to the filing dated March 13.
The consumer bureau was created by the 2010 Dodd-Frank law
and charged with cracking down on financial scams that harm
The company 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
The CFPB declined to comment and the DoJ could not be
reached outside regular U.S. business hours.
A GE Capital spokesman said on Tuesday the matter had
already been disclosed in detail in the prospectus.
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 financing arm 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, the CFPB forced American Express and
JPMorgan Chase & Co to refund customers as a result of
investigations into the companies' credit card procedures.