$85 million coming back to wronged American Express credit card customers
These credit card settlements are coming fast and furious.
This time, it’s three subsidiaries of American Express — American Express Centurion Bank, American Express Travel Related Services Company Inc. and American Express Bank FSB.
An investigation by the Consumer Finance Protection Bureau, FDIC and Utah Department of Financial Institutions discovered a surprising number of illegal practices that were carried out from 2003 until spring of this year.
Because of it, American Express will be paying out $85 million to wronged customers and $27.5 million in fines.
Although those investigations were driven by misleading sales pitches, the problems at American Express are all over the shady banking business map, from promises made in signing up for a card to collecting old debts.
To start, customers who signed up for an American Express Blue Sky credit card through American Express Centurion Bank were promised, in addition to bonus points, $300. But the $300 never came.
Customers of American Express Centurion Bank and American Express Bank were also charged late fees based on percentage of debt, not a flat fee, a practice that was made illegal under the Credit CARD Act.
In a rather bizarre infraction, American Express Centurion Bank used different credit scoring systems based on age and, according to the CFPB, it didn’t even have a way to process applications of people over 35 for a short period of time.
But the most egregious violations came in credit reporting and debt collection.
First, American Express Centurion Bank and American Express Bank FSB were not telling credit bureaus when consumers were disputing their bills, something they’re required to do under the Fair Credit Reporting Act.
This affected their customers’ credit scores and could have limited their ability to obtain credit or forced them to pay higher interest rates on loans.
Then, all three subsidiaries tricked customers into paying off old debts by promising them that doing so would improve their credit.
In reality, debts more than seven years old do not appear on credit reports and therefore make no difference in credit scores.
They also reached settlements with some customers with the promise that, by accepting the terms, debt would be waived or forgiven.
When these customers applied for new credit cards, however, they were told that this wasn’t really the case.
If you were affected by any of these dirty tricks, you don’t have to do anything. American Express will either credit your account or mail you a check by March of 2013.
We’ve said it before, and we’ll say it again: Settlements like this prove that the CFPB is doing its job, standing up for consumers.
According to the CFPB, the FDIC started the investigation but turned it over to the CFPB when it was founded last year, and they both worked on the case together.
Would the FDIC been able to conduct the investigation solo? Perhaps not. This is why we need the CFPB in our corner.