American Express has agreed to refund $85 million to 250,000 customers after an investigation uncovered numerous violations of consumer protection laws, ranging from illegal late fees to age discrimination against credit card applicants, federal regulators said Monday.
The company also failed to report customer disputes to credit bureaus, misled consumers that paying off old debt would help their credit scores and promised people who signed up for “Blue Sky” credit cards that they’d receive $300 but never paid up, regulators said.
American Express must pay an additional $27.5 million in civil penalties, halt the practices and submit to independent audits as part of a settlement that the Consumer Financial Protection Bureau announced Monday in Washington.
The bureau conducted the investigation into the practices of three American Express subsidiaries. It worked alongside the Federal Deposit Insurance Corp., the U.S. Office of the Comptroller of the Currency and the Utah Department of Financial Institutions.
Violations occurred “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,” the bureau’s director, Richard Cordray, said in a statement..
American Express spokesman Michael O’Neill said the company had worked closely with regulators and cooperated fully throughout their reviews.
“We took responsibility for correcting the issues and we are compensating customers where appropriate,” O’Neill said. In agreeing to the settlement, the company doesn’t admit any wrongdoing.
It’s the second time in the span of a week – and the third time since July – that a major credit card company has reached a settlement with the Consumer Financial Protection Bureau. The fledgling watchdog agency was created by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and began operating last year.
On Sept. 24, the bureau and the FDIC announced that Discover Bank would refund $200 million to 3.5 million customers and pay $14 million in penalties to settle charges that it had used deceptive telemarketing tactics to sell “add-on” products, such as wallet protection and identity theft protection.
In July, Capital One Bank agreed to pay $210 million in refunds and fines to settle similar charges that it had pressured consumers into purchasing add-ons.
The high-profile cases send a message to other financial service companies that breaking the law has consequences, said Kent Markus, the assistant director of enforcement for the consumer bureau.
“We want to make it more expensive to break the law than to abide by it,” Markus said Monday during a call with reporters.
American Express has until March 15 to refund customers. Current cardholders will receive credits to their accounts. Those who no longer have Amex cards should get checks in the mail.