CFPB Orders Amex Units to Repay $85M on Illegal Practices

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.