American Express Ordered to Refund $85 Million to Consumers
The Consumer Financial Protection Bureau (CFPB) has ordered three subsidiaries of American Express to refund about $85 million to 250,000 consumers.
This action is the result of a multi-part federal investigation which found that at every stage of the consumer experience, from marketing to enrollment to payment to debt collection, American Express violated consumer protection laws.
The Federal Deposit Insurance Corporation (FDIC) together with the Utah Department of Financial Institutions discovered the illegal activities during a routine examination of an American Express subsidiary, the American Express Centurion Bank.
The FDIC transferred portions of the investigation to the CFPB when the Bureau opened its doors last year and together the agencies pursued the matter. The CFPB later concluded that many of the same violations that occurred at American Express Centurion Bank also took place at American Express Travel Related Services Company, Inc. and American Express Bank, FSB.
The investigations found that the violations occurred at various points in time between 2003 and spring 2012. They occurred at every stage of the consumer experience, from shopping for cards, to applying for cards, to paying charges, and to paying off debt.
More specifically, American Express subsidiaries:
- Deceived consumers who signed up for the American Express "Blue Sky" credit card program: Consumers were sometimes led to believe they would receive $300 in addition to bonus points if they signed up for this American Express Centurion Bank program. But consumers who met the qualifications did not receive the $300. This violates federal laws prohibiting deceptive practices.
- Charged unlawful late fees: American Express Centurion Bank and American Express Bank, FSB billed late fees on certain cards based on a percentage of the debt in violation of the Credit CARD Act.
- Unlawfully discriminated against new account applicants on the basis of age: American Express Centurion Bank used a credit scoring system that treated charge card applicants differently on the basis of age. For a period of time, the bank did not fully implement the system for applicants over the age of 35. This violated the Equal Credit Opportunity Act because it requires credit scoring systems that take age into account to be properly designed and implemented.
- Failed to report consumer disputes to consumer reporting agencies: American Express Centurion Bank and American Express Bank, FSB failed to report the existence of certain customer disputes to credit bureaus, which is a violation of the Fair Credit Reporting Act.
- Misled consumers about debt collection: All three of the American Express subsidiaries deceived consumers into believing there were certain benefits to paying off old debt. Consumers were wrongly told that if they paid off the old debt, the payment would be reported to credit bureaus and could improve their credit scores.
In fact, American Express was not reporting the payments and the debts were so old that even if they had tried to report them, many of the payments would not have appeared on these consumers' credit reports or affected their credit scores. American Express also told some consumers that a portion of their debt would be waived or forgiven if they accepted certain settlement offers. But for customers who applied for a new American Express card, the company was not really forgiving or waiving the debt.
American Express will return the money directly into the accounts of the affected consumers. If the consumer no longer holds the American Express card, American Express will mail a check or credit any outstanding balance.
- 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 we 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.
Consumers are not required to take any action to receive their credits or checks.
If you are one of the consumers affected by the order, American Express will notify you directly. They are responsible for notifying any affected consumers – any other entity that offers to help reclaim your money is likely a scam.