In its annual regulatory filing, American Express based out of New York, said that the late fees being levied by the Centurion unit of the bank was being reviewed not just by the Department of Financial Institutions in Utah, but also by two other agencies in the United States. Centurion was informed this month by the FDIC that there are plans to file formal enforcement action, of which Utah and CFPB will be a part as well.
The outcome of these legal proceedings may result in bringing about many more changes to the current credit card practices being filed by Centurion which includes changes to the current charges, late fees and other payments. American Express said that the costs associated with all these legal proceedings may have a significant impact on the results and operations overall for the company. The probe was termed by American Express as being complex as well as robust. Following the CARD act implemented a couple of years ago, the rules and regulations governing the fees, late payments and other charges on credit cards became even more rigid and complex. America Express said that the changing credit card industry further added to the complexity.
In August 2010, the Credit Card Accountability, Responsibility and Disclosure Act levied caps on every aspect of credit cards including its late payments. The upper limit for late payments on revolving credit cards was capped at $25 while these fees could go up to $35 if the customer repeatedly does not make payments on time. For charge cards, the late fees permitted are up to 3 percent of the overall outstanding balance.
American Express did not mention the overall cost associated with all the legal enforcement actions being taken. Considering the various expenses towards governmental examinations and legal proceedings, the bank assumes that it can be anywhere in the range of zero to $510 million. Though American Express is currently facing legal action, it is not the only lender facing this predicament. There are other major credit card lenders who have been bearing the brunt over the last few months.