More On Legal & Compliancefrom The Advisor's Professional Library
- Client Communication and Miscommunication RIA policies and procedures must specify what type of communications should be retained. The safest course of action is for RIAs to retain all communicationsto clients, from clients, and about client accounts. To comply with fiduciary obligations, communications must be thorough and not mislead.
- Agency and Principal Transactions In passing Section 206(3) of the Investment Advisers Act, Congress recognized that principal and agency transactions can be harmful to clients. Such transactions create the opportunity for RIAs to engage in self-dealing.
The Consumer Financial Protection Bureau (CFPB) has ordered three American Express subsidiaries to refund $85 million to consumers over what it says were violations of consumer protection laws “at every stage” that ranged from marketing practices to enrollment, payment and debt collection.
The agency made the announcement Monday. Agency Director Richard Cordray said of the action in a statement, “Several American Express companies violated consumer protection laws and those laws were violated at all stages of the game—from the moment a consumer shopped for a card to the moment the consumer got a phone call about long-overdue debt.”
He continued, “Today’s orders require the American Express companies to fully refund about $85 million to consumers and it requires them to make specific changes in their business practices. The American Express companies will identify the harmed customers, notify them, and make sure they get back their money.”
The Amex subsidiaries have agreed to end the illegal practices; repay an estimated $85 million to approximately 250,000 consumers; offer convenient repayment for consumers; inform consumers of their debt collection rights; submit to an independent audit; and in addition to the repayment, pay a civil monetary penalty of $27.5 million.
The enforcement action was taken jointly with three federal bank regulators: the Federal Deposit Insurance Corp. (FDIC), the Federal Reserve, and the Office of the Comptroller of the Currency, as well as with the Utah Department of Financial Institutions.
The illegal activities were discovered, according to the CFPB, by the FDIC together with the Utah Department of Financial Institutions during a routine examination of an American Express subsidiary, the American Express Centurion Bank.
The FDIC transferred portions of the investigation to the CFPB when the bureau opened its doors in 2011, and the agencies continued to pursue the action together. The CFPB later concluded that many of the same violations that occurred at American Express Centurion Bank also took place at American Express Travel Related Services Co. and American Express Bank FSB.
Investigations revealed violations occurring at various times between 2003 and this spring, at “every stage of the consumer experience.” The CFPB said that the subsidiaries deceived consumers who signed up for the American Express “Blue Sky” credit card program; charged unlawful late fees; unlawfully discriminated against new account applicants on the basis of age; failed to report consumer disputes to consumer reporting agencies; and misled consumers about debt collection.
All three subsidiaries, said the CFPB, deceived consumers into believing there were certain benefits to paying off old debt. Consumers were wrongly told that if they paid off the old debt, the payment would be reported to credit bureaus and could improve their credit scores. In fact, AmEx was not reporting the payments, and the debts were so old that even if they had tried to report them, many of the payments would not have appeared on these consumers’ credit reports or affected their credit scores.
AmEx also told some consumers that a portion of their debt would be waived or forgiven if they accepted certain settlement offers. But for customers who applied for a new AmEx card, the company was not really forgiving or waiving the debt.