American Express to Pay $112.5 Million in Fines & Refunds After Lying To Customers

October 1, 2012
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Another day, another major fine for a credit card company.

American Express will refund $85 million to customers and pay $27.5 million in civil penalties to settle regulators’ accusations that the company violated a number of consumer protection laws.

The company led customers to believe they would receive $300 for signing up for the Blue Sky credit card. The customers who fulfilled the conditions of the offer never received the money.

In addition, American Express is accused of making false statements to persuade customers to pay off their credit card balances. The regulators say customers were told that if they agreed to pay off part of their debt, the remaining portion of the balance would be forgiven.

The company also failed to report cardholder disputes to the proper reporting agencies and engaged in possible age discrimination against consumers applying for new card accounts. The violations began in 2003.

The customer refund will affect 250,000 cardholders and will be made by March 15. Those who are still American Express customers will get a credit on their account. Former cardholders will receive a check.

Four federal agencies took part in the investigation: the Federal Reserve, the Consumer Financial Protection Bureau, the Federal Deposit Insurance Corp. and the U.S. Office of the Comptroller of the Currency. The Utah Department of Financial Institutions also played a role in this.

The $27.5 million in fines will be dispersed to the four federal agencies. American Express will pay $9 million to the Federal Reserve, $14 million to the CFPB, $3.9 million to the FDIC and $500,000 to the OCC.

This is the third major credit card company in less than three months to receive a substantial fine.

Just last week, the Consumer Financial Protection Bureau and the FDIC announced that Discover will refund $200 million to their credit card customers for pressuring cardholders into buying expensive payment protection and credit monitoring services. Discover will also pay a $14 million fine.

In July, Capital One agreed to pay up to $150 million to two million consumers as a result of the bank’s telemarketers deceptively pushing these same credit monitoring and payment protection services. In addition, Capital One agreed to pay fines of $25 million to the CFPB and $35 million to the Office of the Comptroller of the Currency.

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One Response to American Express to Pay $112.5 Million in Fines & Refunds After Lying To Customers

  1. Debt Neutrality Petition on October 10, 2012 at 1:20 am

    The problem is that every credit card customer who has ever had a default was harmed by this obscenely overpriced program. Instead of offering the credit protection / debt suspension program for around 2 to 4 cents per hundred dollars per month, the credit card companies charged so much more money that most people only paid for the coverage for a few months.

    In essence, customers were paying for 5 years coverage with about 3 to 4 months worth of premiums, but only getting 3 to 4 months worth of coverage.

    So there was no true default protection for consumers because this was an unregulated way over priced program wrapped around a federally regulated program. Virtually all credit card defaults in the past 15 years should be overturned.

    For the record, I had my anti credit-protector website up in late 2007. http://www.credit-protector.com

    In that website I stated that the credit protection program may be the biggest consumer rip off in recent times. But now we can add that consumer credit card defaults should be unwound as well.

    -Alessandro Machi

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