American Express has decided to refund $85 million to consumers and pay $27.5 million in fines to the Consumer Financial Protection Bureau and several other government companies. The company was sued for wrongdoing that ran afoul of consumer financial laws and is the 3rd credit card business to be sued by the fledgling Consumer Financial Protection Bureau.
Card corporations dealing with CFPB
The primary goal of the CFPB is to defend consumers from financial services, but that does not just consist of making new legislation. In fact, a bunch of financial service providers are dealing with suits for breaking regulations associated with other agencies.
Both Discover and Capital One have already faced suits from the CFPB amounting to over $200 million in settlements. A ton of that cash is going back to customers according to NBC News. It seems charge card companies have been the first targets.
CBS explained that one lawsuit against American Express was filed by Utah state regulators, the Federal reserve, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Business and the Consumer Financial Protection Bureau. That suit was recently settled.
Customers get fast cash
In the suit, American Express is alleged to have broken a number of laws. The charge card company was accused of discriminating against applicants over 35 years of age, making false claims about charge card rewards, charging late fees over legal limits and failing to report billing disputes to credit reporting companies, a violation of regulations concerning debt collection and reporting.
American Express consented to refund $85 million to consumers and pay $27.5 million in fines.
Subsidiaries American Express Bank and American Express Centurian Bank were in trouble because they charged a rate higher than legal limits for late fees, according to CNN. Rather than charging one fee, they charge a percentage, according to CBS. Also, $300 bonuses were offered to consumers who got the American Express "Blue Sky" car, but consumers did not obtain that ever.
Age was a huge factor in the credit scoring system at American Express Centurian Bank. That is not legal because it is known as discrimination.
Looking at debt practices
At American Express and its subsidiaries, there were lies being told from 2003 until now, according to CBS. The lie was that consumers could increase their credit scores if they paid off debts older than 7 years. These debts do not even show up on a credit score after that time frame.
According to NBC News, 250,000 people will get part of the $85 million in refunds. This will take place in March 2013.
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