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Why the CFPB Pursued American Express for Its Debt Collection Practices

            Although it’s still a relatively new agency, the Consumer Financial Protection Bureau (CFPB) has achieved some major victories during the past two years against large companies. Starting back in February of 2011, the CFPB began closely scrutinizing American Express’ subsidiary Centurion Bank in regards to its debt collection practices.                                                             Apparently, the company was “[a]ppealing to consumers who wanted to clean up their credit scores . . . [by telling them] that those scores would improve if they paid off old debts.” Unfortunately, an investigation revealed that the company wasn’t even reporting those payments to the credit bureaus.                                                                                                                                   This improper activity was especially notable since American Express “is the country’s biggest credit card issuer by purchase volume. Last year, the lender had revenue of $30 billion, up 9 percent from a year earlier.”                                                                                      Additional Wrongdoings Discovered by the CFPB and Other Federal Agencies

            Besides the CFPB, the Federal Reserve, the Office of the Comptroller of the Currency and the Utah Department of Financial Institutions were involved in these investigations. (The two bank subsidiaries of American Express – Centurion Bank and American Express Bank, FSB – are both based in Utah). Here are some of the other negative findings:

  • Misleading promotions were made by American Express concerning its Blue Sky travel reward credit card program. A number of customers believed that they would be given a $300 reward that was actually never given out;
  • American Express practices age discrimination against some applicants;
  • The company failed to adequately monitor the activities of many third-party vendors. In the words of federal regulators, American Express displayed “deficient management oversight of the bank’s service providers;”
  • Numerous questions were raised regarding the company’s “payment protection plans.” American Express has stated that it’s now cooperating with regulators and plans to stop marketing programs that don’t provide the benefits implied;
  • In general, the CFPB and other agencies criticized American Express for violating consumer protection laws that extended “from the moment a consumer shopped for a card to the moment the consumer got a phone call about a long overdue debt.”

Penalty Imposed and Amount to Be Repaid to Consumers

            This successful multiagency probe resulted in American Express being ordered to reimburse $85 million to approximately 250,000 customers. Refund checks under this settlement were scheduled to be sent out beginning in March of 2013.

General Concerns Remain Regarding Many Financial Institutions

            In its coverage of this story, The New York Times noted that too many companies, including American Express, appear to be “prey[ing] on customers’ fears, particularly those who are anxious about a persistent recession.” Hopefully, this action taken against American Express and other major financial institutions will provide consumers with a much safer marketplace.


Shane Smith
Advocate for the Seriously Injured in Georgia