The Consumer Financial Protection Bureau issued a consent order against two American Express banking subsidiaries for unintentionally discriminating against consumers in Puerto Rico, the U.S. Virgin Islands, and other U.S. territories.
The two companies – American Express Centurion Bank and American Express Bank, FSB – allegedly offered consumers in those territories credit and charge card terms that were inferior to those available in the 50 states. They also supposedly discriminated against certain consumers with Spanish-language preferences.
The two subsidiaries administer the credit and charge card lines of business of New York Financial giant American Express Companies.
Over the course of at least ten years, more than 200,000 consumers were allegedly harmed by the discriminatory practices, which included charging higher interest rates, imposing stricter credit cutoffs, and providing less debt forgiveness in violation of the Equal Credit Opportunity Act, the bureau said.
In 2013, American Express self-reported discrepancies between terms offered for cards in the 50 U.S. states and its Puerto Rico and U.S. Virgin Islands cards. Through the course of a supervisory review, the bureau concluded that, from at least 2005 to 2015, the Puerto Rico and U.S. Virgin Island cards had different—and often worse—pricing, rebates, and promotional offers, underwriting, customer and account management services, and collections practices than its U.S. cards.
However, the bureau’s review found that American Express hadn’t intentionally discriminated against its customers. The discrepancies were the result of different business units overseeing the two different sets of cards.
American Express has paid approximately $95 million in consumer redress during the course of its internal review and the bureau’s review. Last week’s order requires it to pay at least another $1 million to fully compensate harmed consumers.
The CFPB isn’t assessing a penalty in this case, largely because American Express self-reported the violations, self-initiated remediation for the harm done, and fully cooperated with its review and investigation, the bureau said.
“Consumer financial protections are not confined within the 50 states,” said CFPB Director Richard Cordray. “American Express discriminated against consumers in Puerto Rico and the U.S. territories by providing them with less-favorable financial products and services. They have ceased this practice and are making consumers whole. In particular, because they self-reported the problem and fully cooperated with our investigation, no civil penalties are being assessed in this matter.”