The Consumer Financial Protection Bureau issued its third major enforcement action, this time against American Express. Although the total amount of the penalty — $112 million – is smaller than the fines against the two previously penalized companies – Capital One at $210 million and Discover at $214 million—the fine is the largest in relation to the number of customers affected.
American Express is being required to pay $85 million to approximately 250,000 customers, or $340 per customer. That compares with penalties equaling $75 per customer at Capital One and $57 per customer at Discover.
In addition to payments to customers, American Express is being hit with civil money penalties from several regulators totaling $27.4 million.
The FDIC and the Utah Department of Financial Institutions had been examining American Express for some time, with the CFPB joining the investigation about a year ago. The Office of the Comptroller of the Currency and the Federal Reserve Board also took actions against American Express.
The CFPB said American Express misrepresented to consumers that if they entered into an agreement to settle old debt (that was no longer being reported to consumer reporting agencies), such settlement would be reported to consumer reporting agencies and thereby improve the consumer’s credit scores. In fact, no such reporting occurred.
The CFPB also said American Express violated federal law by using settlement solicitations that implied that consumers who entered into settlement agreements to partially pay such debts would have the remaining balance of their debts forgiven, when in fact the balances remained a debt owed to American Express. The CFPB said the company also used solicitations that misrepresented the points and awards consumers would receive upon enrollment in one of American Express’ credit card products.
The civil money penalties are being assessed as follows: $14 million to the CFPB; $9 million to the Federal Reserve; $3.9 million to the FDIC and $500,000 to the OCC.
The American Banker newspaper reported that Kent Markus, the CFPB’s directors of enforcement, said in a conference call with reporters: “This action is intended as a message to all entities that provide consumer financial products or services that there are consequences for violating the law.”