Two American Express credit cards shown in Surfside, Fla., file photo
(Photo: Wilfredo Lee, AP)
Several American Express subsidiaries will refund at least $59.5 million to more than 335,000 consumers for illegal credit card practices, federal regulators said Tuesday.
The affiliates also agreed to pay $16.2 million in fines under the settlements announced by the Consumer Financial Protection Bureau, Federal Deposit Insurance Corporation and the Office of Comptroller of the Currency.
The refunds and penalties relate to add-on products, such as credit monitoring and payment protection, that the company and its subsidiaries offered and sold to card holders.
"Everyone should be on notice of this issue," CFPB Director Richard Cordray said in announcing settlements over the deceptive conduct. "Today we are refunding thousands of American Express customers who were harmed by these illegal practices."
The enforcement action is the fourth the 2½-year-old consumer agency has imposed with other federal regulators for violations involving credit card add-on products.
American Express spokeswoman Marina Norville said the subsidiaries have discontinued the programs involved in the violations, which she said company officials self-corrected while negotiating the settlements. Most customers affected have already received refunds, the company said.
"We want the same thing the regulators want: to be completely honest, fair and transparent with our customers," said Norville.
Regulators said deceptive marketing violations began in 2000 and continued through 2012. They involved such programs as Account Protector, an add-on offering that led some consumers to believe their minimum monthly payment would be canceled if they experienced financial hardship due to unemployment, disability or other major life event.
However, the benefit payment was limited to 2.5% of a consumer's outstanding balance, up to $500. In many cases, that amount was less than the minimum payment due, regulators said. Consumers were falsely led to believe the protection would last up to 24 months. And they were told there would be no fee if the account balance was paid in full each month - but weren't told the balance had to be paid before their regular payment due date.
Separately, American Express subsidiaries used telemarketing sales calls in Spanish to market a "Lost Wallet" protection program to Puerto Rico consumers. But the marketing sales scripts varied, and material sent to the consumers was written in English. As a result, the consumers weren't adequately alerted to the steps needed to receive full benefits.
Regulators also said the American Express subsidiaries engaged in unfair billing and other illegal practices involving the company's identity protection add-on products. These offerings included a service to monitor card holders' credit information and require written authorization from customers.
But consumers were immediately charged add-on fees even before they submitted the necessary authorization, regulators said. An estimated 85% of the customers who enrolled paid the full fee, sometimes for several years, without receiving all of the promised benefits.