The Consumer Financial Protection Bureau announced this morning it has ordered three subsidiaries of American Express to refund about $85 million to about a quarter of a million consumers.
According to the agency, an investigation found “that at every stage of the consumer experience, from marketing, to enrollment to payment to debt collection, American Express violated consumer protection laws.”
The three subsidiaries are supposed to identify the harmed customers and make sure they get their money back.
(I left a message with American Express and will add its comment when it comes in.)
Update: American Express spokesman Michael O'Neill says: "We worked closely with regulators and cooperated fully with them throughout the reviews. We took responsibility for correcting the issues are are compensating customers where appropriate."
O'Neill says the refunds will be made in the "coming months, as soon as possible."
He also noted that American Express continues cooperate with regulators in an industrywide examination of add-on card products, as well as conducting its own review.
The CFPB says the illegal activity at the American Express subsidiaries was uncovered by the Federal Deposit Insurance Corp. and the Utah Department of Financial Institutions during a regular exam of American Express Centurion Bank. Once the CFPB took over the investigation, it found that similar violations were happening at American Express Travel Related Services Co. and American Express Bank.
Among the violations, according to the CFPB:
— American Express Centurion Bank and American Express Bank charged late fees based on a percentage of the debt, a violation of the CARD Act.
— Cards applicants were treated differently based on their age.
— The two banks didn’t report when consumers disputed charges to the credit bureaus.
— The three subsidiaries lied to consumers about the benefits to credit reports if they paid off old debt. (Apparently, there often wasn’t any benefit.)
— American Express Centurion Bank led consumers to believe that they would get $300 in extra bonus points by signing up for a credit card program. Qualified consumers didn’t get the points.
The CFPB says several federal agencies are seeking a total of $27.5 million in civil fines against American Express, too.
The CFPB, working with other regulators, has been cracking down on card companies and ordering them to refund millions of dollars to consumers. Regulators ordered Capital One this summer to refund $140 million to customers and recently ordered Discover Financial Services to return about $200 million to consumers.
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