Synchrony Bank is a wholly-owned by Synchrony Financial Inc.
Describing Synchrony’s application, government regulators wrote of the proposed product: “As with other secured credit cards, therefore, a consumer must provide a security deposit to open a [dual feature credit card] DFCC card account. After at least one year, a DFCC customer that clears certain eligibility thresholds is offered the opportunity to graduate to use the unsecured feature of the account on terms that were disclosed at the opening of the DFCC account and then re-disclosed in connection with the opportunity to opt-in.”
CFPB staff wrote in the approval order that cards made available to borrowers with lower credit scores than are required for typical credit cards “represent a potentially significant point of access to credit for certain consumers. Like other secured card offerings, the DFCC offers such consumers the opportunity to improve or establish their credit profile.”
The government noted that Synchrony committed to bucking an industry trend by charging lower interest rates for secured cards than for unsecured cards issued to customers who lack strong credit profiles.
In its application for permission to issue the new cards, Synchrony pledged to ensure customers understand that “the account has a secured and an unsecured feature; there are different pricing and benefits associated with each feature of the account; only the secured feature will be accessible at account opening.”
Synchrony wrote that customers who switched from secured to unsecured credit cards would not be able to return to holding secured cards.
In late July, Synchrony Chief Executive Margaret Keane warned that the country should expect a wave of credit card defaults as federal stimulus dollars wound down.