AMEX Hit with $85 Million in Regulatory Penalties
American Express has been ordered to reimburse consumers $85 million for credit card management practices that regulators said damaged consumers.
The regulators involved were the Consumer Financial Protection Bureau, the FDIC and the Utah Department of Financial Institutions.
In a statement about the order, the CFPB explained that examiners from the FDIC and UDFI had initially launched an investigation into violations they uncovered when examining American Express. The CFPB then inherited the investigation when the agency took over responsibilities for consumer protection from the FDIC.
“Our investigations found that when consumers were shopping for credit cards, one American Express company sent potential customers misleading credit card offerings in the mail. When consumers applied for cards, the same company engaged in practices that unlawfully discriminated on the basis of age,” the CFPB said, alleging further violations on the billing side as well.
“In connection with consumers paying their bills, American Express companies violated consumer financial laws. For example, we found that these American Express companies charged consumers excessive late fees. And we found that all three American Express subsidiaries − American Express Centurion Bank and American Express Bank, FSB, along with their parent company and affiliate, American Express Travel Related Services Company, Inc. – misled people into paying off old debt by telling them that it would be reported to the credit bureaus and their credit scores would improve. In fact, the debt was not reported to the credit bureaus and in any event it was so old that it may not have appeared in credit reports anyway,” the agency added.
In conjunction with the FDIC and UDIC, along with the Board of Governors of the Federal Reserve System and the Office of the Comptroller of the Currency, the CFPB has ordered that:
- Customers who were promised $300 for signing up for a Blue Sky Credit Card will get the $300.
- Consumers who paid an illegal late fee will be reimbursed, with interest.
- Consumers who paid old debt in response to deceptive promises to report payment to credit bureaus will be reimbursed the money they paid plus interest.
- Consumers who were promised their debt would be forgiven but were denied new American Express cards because the debt was not really forgiven, will receive $100 and a pre-approved offer for a new card with terms the CFPB and the FDIC find acceptable. If the consumer already paid the waived or forgiven amount in order to get a new card, they will be refunded that amount plus interest.