This week the Consumer Finance Protection Bureau delivered a blow to American Express, ordering them to refund $85 million to almost 250,000 customers who were charged illegal late fees, promised sign-on bonuses that were never delivered, and who paid off old debts that they were told would be forgiven, but weren’t.
Richard Cordray, director of the Consumer Finance Protection Bureau (CFPB), said in a statement on the CFPB website, “several American Express companies violated consumer protection laws and those laws were violated at all stages of the game – from the moment a consumer shopped for a card to the moment the consumer got a phone call about long overdue debt. Today’s orders require the American Express companies to fully refund about $85 million to consumers and it requires them to make specific changes in their business practices.”
Late Fees and Forgiven Debts
At issue, in part were late fees charged by American Express which were based on a percentage of the debt that was in violation of the Credit CARD Act (Credit Card Accountability Responsibility and Disclosure Act of 2009). American Express was ordered to refund all such fees, with interest.
Another problem was with debt collection practices – certain customers were promised that if they paid old debts, the repayment would be reported to credit bureaus, or that their debt would be forgiven, so they could be approved for a new credit card. That didn’t happen, and many customers paid off their debts only to be turned down for a new card and find their credit rating ruined.
Under the CFPB order, customers who were denied new cards after promising that debt would be forgiven will receive a pre-approved offer for a new American Express card, plus $100. If they paid the debt already, and got a new card, they will be refunded the amount they paid to get the new card.
A Piece of Blue Sky
If you’ve ever heard the saying, “let’s sell them a piece of blue sky” in reference to swindling customers, you can appreciate the irony surrounding American Express’s Blue Sky credit card. Some customers were promised a $300 bonus for signing up for the card, but never received it. Now American Express has been ordered to pay that $300 reward to everyone who was told they would get it.
The confusion stemmed from a promotion at the end of 2010, which offered customers reward points that were valued at $300, but federal regulators said that American Express misled customers because the wording of the marketing materials made some people believe they would get $300 on top of the reward points. Marina Hoffmann Norville, an AmEx spokesperson, said in a statement that the company “took responsibility for correcting the issues,” and that the majority of the refunds will go toward late fee and debt-collection issues, not disgruntled Blue Sky customers.
Other Violations and How to Get Your Refund
Other problematic practices found by the CFPB took place between 2003 and 2012 – things like unlawful age discrimination against new applicants, which violated the Equal Credit Opportunity Act, and failing to report customer disputes to credit bureaus, a violation of the Fair Credit Reporting Act.
Anyone affected by the ruling and who has a refund coming will be contacted by American Express, who is responsible under the court order to notify all affected customers. The CFPB reminds consumers that anyone contacting customers with offers to help them claim their refund is likely to be a scammer. No action is required for AmEx customers to receive their refunds, if they have them coming.