CFPB, FDIC, Fed and OCC slap AmEx Credit Card for numerous violations

UPDATE: CFPB Director Richard Cordray has posted a followup blog called “Consumers expect, and deserve, that companies follow the rules.

ORIGINAL: Four federal financial regulators have announced an order for at least $85 million in restitution and $27.5 million more in penalties alleging a variety of violations — including age discrimination — of equal credit opportunity, debt collection and credit reporting laws by the American Express credit card. Here find the statement from the CFPB, statement from the OCC, statement from the Federal Reserve and statement from the FDIC, whose investigation jointly with the Utah Department of Financial Institutions discovered the violations. The statements include links to additional settlement order documents.

From the CFPB: “at every stage of the consumer experience, from marketing to enrollment to payment to debt collection, American Express violated consumer protection laws.”

A quick thought. I wonder what opponents of the CFPB will say, since the violations were “discovered” by the FDIC and Utah bank regulators and every single federal financial bank regulator participated in the case? Will opponents attack the CFPB anyway?

More on the violations, from the CFPB:

“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.”

This is the third major credit card company recently found by regulators to be in violation of consumer laws. In July, CFPB and OCC issued an order against Capital One. In September, CFPB and FDIC issued an order against Discover Card. In both earlier cases, the firms were dinged for deceptive marketing and billing of junky card add-on products, such as debt cancellation and credit monitoring subscription products. In all three cases, consumers are receiving restitution.


Ed Mierzwinski

Senior Director, Federal Consumer Program, U.S. PIRG Education Fund

Ed oversees U.S. PIRG’s federal consumer program, helping to lead national efforts to improve consumer credit reporting laws, identity theft protections, product safety regulations and more. Ed is co-founder and continuing leader of the coalition, Americans For Financial Reform, which fought for the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, including as its centerpiece the Consumer Financial Protection Bureau. He was awarded the Consumer Federation of America's Esther Peterson Consumer Service Award in 2006, Privacy International's Brandeis Award in 2003, and numerous annual "Top Lobbyist" awards from The Hill and other outlets. Ed lives in Virginia, and on weekends he enjoys biking with friends on the many local bicycle trails.

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