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Order: American Express is responsible for compensating customers for illegal practices

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As a result of today’s order, American Express must repay an estimated $85 million to approximately 250,000 consumers. American Express will return the money directly into the accounts of the affected consumers. If the consumer no longer holds the American Express card, American Express will mail a check or credit any outstanding balance.

  • Customers who were promised $300 for signing up for a Blue Sky Credit Card will get the $300.
  • Consumers who paid an illegal late fee will be reimbursed, with interest.
  • Consumers who paid old debt in response to deceptive promises to report payment to credit bureaus will be reimbursed the money they paid plus interest.
  • Consumers who were promised their debt would be forgiven but were denied new American Express cards because the debt was not really forgiven, will receive $100 and a pre-approved offer for a new card with terms we and the FDIC find acceptable. If the consumer already paid the waived or forgiven amount in order to get a new card, they will be refunded that amount plus interest.

Consumers are not required to take any action to receive their credit or check.

If you are one of the consumers affected by the order, American Express will notify you directly. They are responsible for notifying any affected consumers – any other entity that offers to help reclaim your money is likely a scam.

Consumers expect, and deserve, that companies follow the rules

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Today, in close partnership with our fellow banking regulators, we are ordering three subsidiaries of the American Express Company to put some $85 million back into the wallets of consumers. The subsidiary companies will modify various credit card practices found to be illegal, make full refunds to approximately 250,000 customers, and pay $14.1 million in fines.

Over the course of a long, multi-agency investigation, we found that at every stage of the consumer experience − from advertising to enrollment to payment to collection – these American Express subsidiaries had violated various consumer financial laws.

The Federal Deposit Insurance Corporation (FDIC), along with the Utah Department of Financial Institutions, uncovered the problems during a routine examination in February 2011. After the Consumer Financial Protection Bureau (CFPB) opened its doors for business five months later, we inherited many of the consumer protection functions of the FDIC, and the case was passed on to us.

Upon further investigation, we learned that the problems were widespread.

Our investigations found that when consumers were shopping for credit cards, one American Express company sent potential customers misleading credit card offerings in the mail. When consumers applied for cards, the same company engaged in practices that unlawfully discriminated on the basis of age. In connection with consumers paying their bills, American Express companies violated consumer financial laws. For example, we found that these American Express companies charged consumers excessive late fees.

And we found that all three American Express subsidiaries − American Express Centurion Bank and American Express Bank, FSB, along with their parent company and affiliate, American Express Travel Related Services Company, Inc. – misled people into paying off old debt by telling them that it would be reported to the credit bureaus and their credit scores would improve. In fact, the debt was not reported to the credit bureaus and in any event it was so old that it may not have appeared in credit reports anyway.

So today, multiple agencies are joining together to require the American Express companies to refund money to consumers, pay fines, and change their practices. This includes not only the CFPB and the FDIC, but also the Board of Governors of the Federal Reserve System and the Office of the Comptroller of the Currency. The State of Utah will also be taking its own related action through its Department of Financial Institutions.

We are ordering the American Express subsidiaries to make a full refund of approximately $85 million to consumers who were harmed. The American Express subsidiaries will identify those consumers, notify them, and make sure they get their money back. The burden will not fall on customers to pursue their refunds. To ensure compliance with all terms of the agreements, the companies will hire independent auditors to verify that the orders are being carried out.

Under the non-monetary terms of the Consent Order with American Express Centurion Bank, the bank is required to stop deceiving consumers by falsely promising a rebate or a points feature on credit cards or any other card. The company will have to ensure that it does not unlawfully discriminate based on age in deciding who qualifies for a credit card. And the bank and American Express Bank, FSB will properly report disputes to credit bureaus and make sure that cardholders are informed of their rights. They will also stop charging consumers the illegal late fees.

The Bureau is also issuing a consumer advisory today. The advisory will inform consumers who were harmed about how they will benefit from this action and how they will receive money, if they are eligible.

We share the same task with these companies themselves: to make sure that every business is following the rules. Consumers expect and deserve that. We will continue to work steadily toward this objective.

Working to help industry understand and comply with the new remittance rule: Countries list and webinar

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The rule to implement the consumer protections created by the Dodd-Frank Act for certain electronic transfers of funds to other countries – the remittance rule – will go into effect on February 7, 2013. We’re undertaking a number of efforts to help industry understand and comply with the new requirements. These include: releasing a list of countries and other areas to which a particular exception to the rule’s disclosure requirements applies, hosting a webinar, answering specific questions, and releasing a small business guide.

What is the countries list?

The remittance rule generally requires disclosure of, among other things, exact amounts to be received in a foreign currency, fees, and taxes, but estimates of these amounts are permitted in several situations. One situation where estimates are allowed is when the provider cannot determine exact amounts because of the laws of the recipient country. We are interpreting the exception regarding the laws of a recipient country to apply to these countries and other areas.

Webinar October 16th

Join us for a free, 90 minute webinar about the new requirements for remittance transfer providers on October 16th at 2:30 p.m. EST. We’ll give an overview of the rule and answer questions about compliance.

The webinar should be useful for money transmitters, banks, credit unions, and other companies that send money abroad for consumers, as well as other organizations that work with or represent consumers who send money abroad. Agents, software providers, foreign banks and others involved in international fund transfers from the United States may also be interested.

Small business guide

In the coming weeks, we will release a small business compliance guide to give more help to smaller entities that have to comply with the rule.

Questions?

While we expect to answer many questions at the webinar, our team can also answer additional questions about the rule. You can reach us at (202) 435-7700.

What do you think about our draft strategic plan for the next five years?

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We have an expansive, vital mission: to make markets for consumer financial products and services work for Americans. But, how do we do that with limited resources?

We’ll accomplish our mission by setting goals, establishing strategies, and measuring performance. Our strategic plan outlines this information and describes how we will focus our resources on the areas where we can have the biggest impact.

Check out our draft
Today it’s just a draft – take a look at our strategic plan for 2013 – 2018.

What do you think?
We want your thoughts and ideas on how to improve our plan. Weigh in by emailing your comments on the plan to StrategyPlanComments@cfpb.gov by October 25, 2012.

How will the Discover order handle refunds?

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As a result of today’s order, Discover will pay approximately $200 million in restitution to more than 3.5 million consumers.

How will consumers be refunded?

Anyone affected by this order will automatically receive a credit to their account, or, if they’re no longer a Discover customer, they’ll receive a check in the mail or have any outstanding balance reduced by the amount of the refund.

Consumers don’t need to take any further action to receive their credit or check.

If you have questions about whether you are entitled to a refund, please contact Discover.

As with any time large numbers of consumers get refunds, scammers sometimes pop up. Watch out for anyone who tries to charge you, tries to get you to disclose your personal information, or asks you to cash a check and send a portion to a third party in order to “claim your refund.” It’s a scam. Call us at (855) 411-CFPB.

  

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