American Express must refund an estimated $85 million to approximately 250,000 credit-card customers for illegal practices undertaken by three of its subsidiaries, in an enforcement action by the Consumer Financial Protection Bureau. American Express is also required to pay a $27.5 million civil penalty.
The CFPB said a federal investigation found American Express had violated consumer protection laws in its marketing, enrollment, billing, and debt-collection practices at various times between 2003 and 2012.
The CFPB cited the following violations:
- Consumers who signed up for the American Express "Blue Sky" credit card program were sometimes led to believe they would receive $300 in addition to bonus points. But consumers who met the qualifications did not receive the $300.
- American Express subsidiaries billed late fees on certain cards based on a percentage of the debt, which violates the federal Credit CARD Act.
- American Express Centurion Bank unlawfully discriminated against new account applicants on the basis of age through its credit-scoring system. For a period of time, the bank did not fully implement the system for applicants over 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.
- American Express subsidiaries failed to report consumer disputes to consumer reporting agencies in violation of the Fair Credit Reporting Act.
- American Express deceived consumers into believing there were 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 payments were never reported 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.
American Express agreed to change its practices and to make restitution to its affected cardholders. "If you're one of the 250,000 customers who are due a refund, you won't have to take any action," said Pamela Banks, senior policy counsel at Consumers Union, the policy and advocacy division of Consumer Reports. "You should see a credit in your account, or if you no longer have an AmEx card, the company is obligated to send you a refund check."
This action comes in the heels of recent CFPB actions taken against Discover Bank and Capital One which resulted in millions of dollars in restitution to consumers.
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CFPB orders American Express to pay $85 million refund to consumers harmed by illegal credit card practices, [CFPB]
CFPB Forces American Express to Refund $85 Million, [Consumers Union]