UTAH – The federal government announced Thursday that GE Capital Retail Bank, known as of this month as Synchrony Bank, engaged in credit card lending discrimination against Hispanic consumers.
As part of a settlement with the U.S. Department of Justice and the Consumer Financial Protection Bureau, the bank has agreed to pay $169 million to settle the case, according to officials.
“The blatant discrimination that occurred here is unlawful and will not be tolerated,” said Acting Assistant Attorney General Jocelyn Samuels for the Civil Rights Division. “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.”
GE Capital’s settlement with the federal was filed today in the U.S. District Court for the District of Utah. The court must approved the settlement, officials said.
The settlement resolves claims that GE Capital violated the Equal Credit Opportunity Act by excluding borrowers, who indicated that they preferred communications to be in Spanish or had a mailing address in Puerto Rico, from two credit card debt-repayment programs, officials said.
The settlement provides that the $169 million be used as relief to about 108,000 borrowers in the form of payments and the reduction, or complete waiver, of borrowers’ credit card balances, authorities said.
GE Capital itself identified and reported the discrimination to the Financial Protection Bureau, was proactive in taking steps toward providing relief to affected borrowers, and has worked closely with the department and the bureau to further identify and compensate victims of the discrimination, officials said.
Specifically, GE Capital has already provided the benefits of the offers or their equivalent value to approximately 84,000 borrowers, totaling $131.8 million in relief.
Following the settlement, the bank will provide the remaining $37 million in payments, reductions and waivers to affected borrowers.
According to the government’s complaint, the department alleges the following:
- That from January 2009 to March 2012, GE Capital excluded certain borrowers, due to their national origin, from the “Statement Credit Offer” – a program offering eligible borrowers a credit to their account if they met certain criteria – and the “Settlement Offer” – a program offering eligible borrowers the chance to settle their credit card debt if they paid a percentage of their remaining account balance, ranging from 25 percent to 55 percent.
- As a result of the exclusions, Hispanic borrowers experienced higher debt levels and longer periods of debt; some of these Hispanic borrowers 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 a third party; and other damages, including emotional distress.
GE Capital’s settlement with the department, which is subject to court approval, was filed today in the U.S. District Court for the District of Utah in conjunction with the department’s complaint. GE Capital resolved the CFPB’s claims by entering into a public administrative settlement.
In addition to the $169 million dollars in relief, GE Capital has also agreed to eliminate negative credit reports for affected borrowers that occurred during periods of the alleged discrimination . GE Capital will also take affirmative steps to strengthen its fair lending compliance, and the department commends the efforts the bank has already taken to that end.
These steps put in place strong review mechanisms and training to ensure borrowers are not discriminated against because of their national origin.