American Express Agrees to Refund $85 Million

The following is an excerpt from an article in:


The New York Times
Tuesday, October 02, 2012

American Express Agrees to Refund $85 Million

By JESSICA SILVER-GREENBERG

American Express will reimburse $85 million to about 250,000 customers to resolve accusations that the company violated federal law in its marketing, billing and debt collection practices, the company and the government said Monday.

The settlement is the latest in a series of enforcement actions that federal and state regulators have brought against some of the nation’s largest financial institutions for problems in their credit card businesses. In each of the cases, regulators have exposed critical flaws in how the banks monitor vendors that perform central business functions.

The multiagency investigation of American Express included the Consumer Financial Protection Bureau, the Federal Reserve, the Office of the Comptroller of the Currency and the Utah Department of Financial Institutions. They discovered violations of consumer protection laws between 2003 and this year that started “from the moment a consumer shopped for a card to the moment the consumer got a phone call about long overdue debt,” Richard Cordray, the director of the consumer protection bureau, said in a statement.

To win customers for its Blue Sky travel reward credit card program, the lender sometimes offered customers a misleading promotion. Some customers thought they would receive a $300 reward, but that never materialized, the regulators said.

In doling out credit, they said, American Express also discriminated against applicants based on their age. The company also duped consumers into paying off stale credit card debt with the promise of improving their credit score, the investigators said; in fact, regulators found, American Express was not reporting the payments to the credit bureaus at all.

The action was directed at the two main bank subsidiaries of American Express, Centurion Bank and American Express Bank, FSB, which are both based in Utah and issue credit cards. Also singled out was American Express Travel Related Services Company, which provides support and marketing for the banking units.

American Express customers should expect refunds by March 2013, regulators said. The company also agreed to pay $27.5 million in fines to the regulators.

For more, visit www.nytimes.com.