October 3, 2012

American Express will refund $85M to customers

American Express Co. said Monday that some 250,000 customers in Texas and across the nation will be reimbursed about $85 million in a settlement reached with the federal government over allegedly violating federal law related to the company's credit card operations.

The New York Times reports that several government agencies, including the Consumer Financial Protection Bureau and Office of the Comptroller of the Currency, conducted the investigation into American Express activities. The report said the agencies investigated transactions involving three American Express subsidiaries from 2003 to 2012, covering credit card advertising and how debt collections were pursued.

The company also agreed to pay $27.5 million in fines.

The three subsidiaries involved in the agreement are American Express Centurion Bank, American Express Travel Related Services Company and American Express Bank FSB.

The violations of consumer protection laws started “from the moment a consumer shopped for a card to the moment the consumer got a phone call about long overdue debt,” Richard Cordray, director of the consumer protection bureau, said in a statement issued Monday.

For example, the regulators alleged, American Express advertised its “Blue Sky” travel reward credit card program with promises of a $300 reward that was never realized. The Times also reported that American Express steered consumers to pay off old credit card debt in order to boost their credit score, the investigators alleged, but those payments were not reported to credit bureaus.

American Express (NYSE: AXP) customers are expected to see refunds by March 2013, the Times reports.

Under the deal struck with the financial services regulators, the company must stop the deceptive practices and set up independent auditors to ensure that it complies with consumer protection laws.


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