CFPB Orders American Express to Pay $59.5 Million for Illegal Credit Card Practices

Federal Regulators Fine American Express an Additional $16.2 Million


WASHINGTON, D.C. – WEBWIRE – Tuesday, December 24, 2013

The Consumer Financial Protection Bureau (CFPB) today ordered American Express to refund an estimated $59.5 million to more than 335,000 consumers for illegal credit card practices. These practices included unfair billing tactics and deceptive marketing with respect to credit card “add-on products” such as payment protection and credit monitoring. American Express will pay an additional $9.6 million in civil penalties to the CFPB.

“We first warned companies last year about using deceptive marketing to sell credit card add-on products, and everyone should be on notice of this issue,” said CFPB Director Richard Cordray. “Today we are refunding thousands of American Express customers who were harmed by these illegal practices. Consumers deserve to be treated fairly and should not pay for services they do not receive.”

The Bureau has been coordinating this public action with the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC) to identify and address these issues. The FDIC is fining American Express Centurion Bank $3.6 million and the OCC is fining American Express Bank, FSB $3 million. This is the fourth action the Bureau has taken in coordination with fellow regulators to address illegal practices with respect to credit card add-on products.

Misleading Marketing

CFPB examiners discovered that, beginning in 2000 continuing through 2012, three of American Express’s subsidiaries and their vendors and telemarketers engaged in misleading and deceptive tactics to sell some of the company’s credit card add-on products. One such product, a payment protection product called “Account Protector,” allowed consumers to request that 2.5 percent of their outstanding balance, up to $500, be canceled if they encounter certain life events like unemployment or temporary disability. American Express also marketed its “Lost Wallet” product as being able to assist card members in Puerto Rico with cancelling and replacing lost or stolen credit cards, including non-American Express cards, and providing other services, such as recovering lost or stolen documents. Among other things, American Express misled consumers about:

Unfair Billing and Other Illegal Practices

American Express also engaged in unfair billing practices related to its “identity protection” add-on products. These products supposedly include a service to monitor the card members’ credit information. To obtain credit monitoring services, consumers generally must provide written authorization. American Express, however, charged many consumers for these products without or before having the written authorization necessary to perform the monitoring services. As a result, the company:

Enforcement Action

Pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act, the CFPB has the authority to take action against institutions engaging in unfair, deceptive, or abusive practices. In accordance with the orders issued today, the American Express subsidiaries have agreed to correct their practices and refund consumers who were harmed by the illegal practices. Specifically, they have agreed to:

The full text of the CFPB’s Consent Orders for each of the three subsidiaries is available at:

http://files.consumerfinance.gov/f/201312_cfpb_consent_amex_centurion_011.pdf

http://files.consumerfinance.gov/f/201312_cfpb_consent_amex_FSB_012.pdf

http://files.consumerfinance.gov/f/201312_CFPB_Consent_AETRS_013.pdf

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The Consumer Financial Protection Bureau is a 21st century agency that helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives. For more information, visit consumerfinance.gov.



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