Henry Schein Executive Says Privacy Rules Impede Inquiry Into Credit Card Rate Hikes

Company says most cardholders are unaffected

Published: November 20, 2008
By Edie Lau

Privacy rules prevent Henry Schein Financial Services from investigating complaints by customers that their credit card rates are rising unjustifiably, company vice president Keith Drayer says.

Drayer, who pledged last week to personally advocate for Schein customers, told VIN News Service Tuesday that there’s little he can do because Schein credit cards are issued by Advanta Bank Corp., a separate institution.

Because of “the total firewall between Advanta and Schein, I’m not privy to anybody’s personal credit information at all,” Drayer said in a telephone interview. “Even the interest rates, we’re not privy to.”

Drayer said Advanta officials have assured him that higher rates are being assessed only on cardholders whose credit records have changed for the worse. A person’s credit score goes down, for example, if he or she makes a late payment on any credit account. “I was told by Advanta that they’re only raising rates (on customers who) have an event happen,” he said.

However, at least three VIN members have seen their Schein card rates soar into the 30-percent range recently for no apparent reason. Consequently, a larger group of members has been discussing whether and how to pressure Schein to intervene.

Schein, which sells goods and services to the medical, dental and veterinary communities, has offered a credit card through Advanta for eight years, according to Drayer. He said Schein considered the card a good deal for its clients because Advanta gives a generous cash rebate of 2 percent on purchases. (Another option for cardholders is to accumulate credit toward airline flights.)

Schein receives no direct financial benefit from the arrangement, Drayer said.

“Our primary goal is, we want to sell more supplies and equipment, and if this encourages customers to get the rebate and buy more from us, that’s our goal,” he said.

Dr. Carol Tice, a cat doctor in North Carolina, raised the question of rising interest rates on a discussion board of the VIN website in September after she noticed that Advanta had raised the annual rate on her Henry Schein affiliate card above 35 percent.

Following her post, two other veterinarians checked their rates and found that similar increases had been imposed on their accounts. Other Schein cardholders reported being unaffected.

Tice said when she called Advanta to ask why her rate had gone up so precipitously, the customer service representatives could give no specific reason. Tice also called Schein, and was told nothing could be done.

An Advanta spokesman told VIN News Service by e-mail last week: “Consistent with the industry and our cardholder agreement, we periodically evaluate each of our customers' accounts to assess their ongoing creditworthiness and overall lending risk.”

The spokesman declined to discuss specific cases.

Concerned that his colleagues possibly were being taken advantage of, VIN president Dr. Paul Pion contacted executives at Schein. That’s when Drayer promised to help.

“Henry Schein Financial Services has a direct relationship with Advanta Bank, the issuer of the Henry Schein Brand card,” he wrote. “We're in a position to advocate for Henry Schein customers with the card and will proactively do so. The overall credit card industry is in a seriously challenging position, but that does not mean they will be allowed to unilaterally pass on unjustified rate changes. As Vice President of Henry Schein Financial Services, I personally will go to the help of customers who may be subject to any changes.”

Encouraged, Tice contacted Drayer by e-mail last Thursday. He messaged her back on Tuesday, saying that Advanta would send a new opt-out letter notifying her of the rate increase and giving her an opportunity to pay off her balance at her old rate of 7.99 percent before closing the account. Advanta has said that it sends such letters to all customers whose rates are being raised, but Tice and others reported never having received such notices.

The offer of a new notice was too little, too late for Tice.

She wrote back to Drayer: “Since I have already paid most of the balance, the lower rate doesn't mean much to me at this point. I will never bank with them again. I've already had their ridiculous interest rates unknowingly applied to my balance. That is money I will never see again.”

Drayer told VIN News Service that about 9,000 Schein customers hold Advanta cards; among them, 600 are in the animal-health community. He said 92 percent pay their balances in full each month, thereby avoiding interest charges.

He acknowledged that cardholders in the medical and dental fields have also raised concerns “from time to time” about interest-rate increases.

Asked whether Schein would consider ending its relationship with Advanta if it found that the bank were treating customers unfairly, Drayer replied at first, “That’s a private issue.”

When pressed, he said, “If there was absolute proof that they were gouging or doing things unjustified, absolutely, we would take it all the way to the president of Advanta .... (But) I don’t see the credit scores. I know if I go to bat for people, which I do, I get these cryptic messages (about the cases).”

Drayer repeated that he’s not given specific information about cases and was told that any rate increases are justified.

“They’re certainly not raising rates on everyone,” he said, although Advanta has not told him what proportion of cardholders are affected by higher rates.

On Tuesday, after hearing Drayer’s response, Tice checked her credit report online. She found she has a credit score of 765, which is considered “low risk.” Credit scores range from 300 to 850; the higher, the better.

Tice said the report confirms her feeling that Advanta’s actions make no sense. Just recently, she said, she was given a lower interest rate on another credit account.

Dr. Carl Darby, a Schein cardholder in upstate New York, said Schein would have been better off not offering any help in the first place. “If they tell us they’re going to go to bat for us and then they don’t, then that reflects poorly on Schein,” he said.

Darby has said he charges $15,000 to $30,000 a month on his Schein card, reaping a rebate of $200 to $500. He pays the balance in full regularly. He said he is considering canceling the account as a show of support to his colleagues.

Pion said he was confused by Drayer’s changing response, and will ask for clarification. “I still have faith that Schein will do the right thing,” he said.

He suggested that the company at least contact cardholders to alert them to the potential for rate increases. “If I were Schein, I’d tell people ‘We still offer this card, but in this climate, perhaps don’t get it.’ I think it’s in Schein’s best interest not to have (their customers) use the card and risk this headache,” Pion said.

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