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 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 borrowers.
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. (http://r.reuters.com/hez57v)
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 said.
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.
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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.
(Reporting by Chris Peters in Bangalore;
editing by Gopakumar
Warrier and Saumyadeb Chakrabarty)
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