American Express is paying $112 million in refunds and fines to settle regulators' accusations that it charged unlawful late fees and deceived customers to pressure them to pay off old debts or buy extra credit card services.
The company agreed to the settlements announced Monday by four federal agencies, including the Federal Reserve and the Consumer Financial Protection Bureau, and Utah regulators.
American Express is refunding $85 million to about 250,000 customers and is paying $27.5 million in civil fines.
The agencies said American Express violated federal laws prohibiting deceptive practices by using false statements to get customers to settle old debts. The regulators say that included falsely telling customers that if they agreed to settlements to partially pay off their debts, the remaining balance would be forgiven.
The violations were said to have occurred from 2003 to this past spring.
The director of the Consumer Financial Protection Bureau, Richard Cordray, said in a statement that the company violated consumer-protection laws "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."
Unfair fees for debt
American Express also charged late fees on some credit cards based on a percentage of the debt owed, a violation of a 2009 law prohibiting certain credit card practices, the regulators said.
They said customers were sometimes led to believe they would get $300 as well as bonus points if they signed up for Amex's "Blue Sky" credit card program. Customers who met the conditions didn't receive the promised $300, according to the agencies.
In addition, they said the company:
- Unlawfully discriminated against consumers applying for new card accounts on the basis of age.
- Failed to report customer disputes over billing to the consumer-credit reporting agencies.
New York-based American Express also agreed to end the practices and to hire independent auditors to ensure the company's compliance with consumer-protection laws.
Also reaching settlements with the company were the Federal Deposit Insurance Corp. and the U.S. Office of the Comptroller of the Currency, a Treasury Department agency that regulates national banks.