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American Express Gets Slapped With Major Restitutions

American Express is paying $112.5 million to settle claims that the bank charged unlawful late fees, deceived customers who signed up for its “Blue Sky” credit card program, and discriminated against new credit card applicants on the basis of age.

 getting money back The settlement will result in the bank paying $85 million to approximately 250,000 customers.  The bank will also pay penalties totaling $27.5 million to the Consumer Financial Protection Bureau, FDIC and Office of the Comptroller.

A Consumer Financial Protection Bureau press release provided the information for this article.  The press release can be found here: http://www.consumerfinance.gov/pressreleases/cfpb-orders-american-express-to-pay-85-million-refund-to-consumers-harmed-by-illegal-credit-card-practices/

“Several American Express companies violated consumer protection laws and those laws were violated at all stages of the game – from the moment a consumer shopped for a card to the moment the consumer got a phone call about long overdue debt,” a press release quotes Consumer Financial Protection Bureau Director Richard Cordray as saying.  “Today’s orders require the American Express companies to fully refund about $85 million to consumers and it requires them to make specific changes in their business practices.  The American Express companies will identify the harmed customers, notify them, and make sure they get back their money.”

The CFPB says multiple problems were found.  American Express subsidiaries allegedly:

  • Deceived consumers who signed up for the American Express “Blue Sky” credit card program by sometimes misleading customers into believing signing up for the program would result in $300 in bonus points.  Despite making that claim, customers who qualified did not receive the bonus points.
  • Charged customers unlawful late fees based on a percentage of their debt.  This is a violation of the Credit CARD Act.
  • Unlawfully discriminated against applicants on the basis of age.  American Express allegedly used a credit scoring system which treated applicants differently based on their age, but for a period of time did not fully implement the system for people over the age of 35.
  • Failed to report consumer disputes to credit bureaus.
  • Misled consumers about debt collection.  More specifically, consumers were misled into believing old debts which were paid off would be reported to credit bureaus and could improve their credit scores.  In fact, the bank was not reporting the debts and some of the debts were so old payments would not have appeared on consumers’ credit reports or affected their credit scores.  The company also told some consumers a portion of their debt would be forgiven if they accepted certain settlement offers when this was not the case.

Problems were found with the operations of American Express Bank, FSB, American Express Centurion Bank, and American Express Travel Related Services Company, Inc.

The $85 million paid by American Express to consumers will be used for several purposes, including reimbursing, with interest, consumers who paid an illegal late fee; paying $300 to Blue Sky customers who were promised $300 for signing up; and giving consumers who were promised old debt would be forgiven and denied new cards because the debt was not forgiven $100 and a pre-approved offer for a new card.

In addition to making financial restitutions to some of its customers, American Express has also agreed to take a series of other actions.  They include ending the illegal practices which brought on the enforcement action; using independent auditors to ensure compliance with the orders agreed to in the settlement; and informing consumers when debt is too old to collect and not collecting debt unless American Express has documentation evidencing the debt.

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