Federal regulators have ordered American Express to refund an estimated $59.5 million to more than 335,000 consumers for “illegal credit card practices” and pay $9.6 million in civil penalties.
The alleged practices included unfair billing tactics and deceptive marketing of credit card “add-on products” — such as payment protection and credit monitoring.
“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 CFPB coordinated the action against AmEx with the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC). 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.
CFPB examiners found that between 2000 and 2012 three of American Express’s subsidiaries, along with 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, such as 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, The CFPB said that American Express misled consumers about:
- The benefits of the payment protection products: Some consumers were led to believe that if they bought the Account Protector product, their minimum monthly payment would be cancelled if they experienced a qualifying life event. In reality, the benefit payment would be limited to 2.5 percent of the consumer’s outstanding balance, up to $500. In many cases, that amount was less than the minimum payment due.
- The length of coverage of the payment protection products: Consumers were led to believe that the benefit periods for Account Protector would last up to 24 months. In fact, only two of the 13 qualifying events with benefit periods had benefit periods of up to 24 months. The other 11 qualifying events had benefit periods of only one, two, or three months.
- The fees associated with payment protection products: American Express or its vendors would claim that there would be no fee if the balance in the account was paid off every month, without disclosing that the account balance had to be paid off before the end of the billing cycle, which was an earlier date than the consumer’s statement due date.
- The terms and conditions of the Lost Wallet product: American Express used telemarketing sales calls conducted in Spanish to enroll the vast majority of Puerto Rico consumers in this product. Yet American Express did not provide uniform Spanish language scripts for these enrollment calls, and all written materials provided to consumers were in English. As a result, American Express did not adequately alert consumers during the calls about the steps necessary to receive and access the full product benefits.
Here is part of American Express’s prepared response:
“Marketing of the products included in these settlements was discontinued more than a year ago. As previously reported, American Express continues to conduct internal reviews designed to identify issues, correct them and ensure that its products and practices meet a high standard of quality.”