American Express will reimburse $85 million to nearly 250,000 customers to resolve accusations that the company violated federal law. A multiagency investigation of American Express discovered violations of consumer protection laws occurred between 2003 and this year. The company will also pay $27.5 million in fines to the regulators.
The company was accused of violating federal law in its marketing, billing and debt collection practices. Richard Cordray, the director of the Consumer Financial Protection Bureau, said in a statement that the violations started “from the moment a consumer shopped for a card to the moment the consumer got a phone call about long overdue debt.”
For example, the lender sometimes offered customers a misleading promotion to win customers for its Blue Sky travel reward credit card program. The customers thought they would receive a $300 reward, but it never materialized. The investigators also found that the company duped consumers into paying off stale credit card debt with the promise of improving their credit score when American Express was not reporting the payments to the credit bureaus at all. American Express was also accused of discriminating against applicants based on their age when doling out credit.
American Express said it had outlined plans to address each of the violations and “cooperated fully” with regulators. Federal and state regulators have brought a series of enforcement actions against some of the nation’s largest financial institutions in the past few years for problems in their credit card businesses, exposing critical flaws in the way that the banks have been monitoring the vendors that perform central business functions for the bank.
American Express customers should expect their refunds to arrive by March 2013. Last year, American Express had revenue of $30 billion, an increase of 9% from a year earlier. The company has long been known for its aspirational cards and wealthier customer base, and is the country’s biggest credit card issuer by purchase volume.