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American Express Is Latest Federal Target

American Express will refund tens of millions of dollars to about 250,000 charge and credit card customers in the latest government investigation to find consumer abuse.

In all, AmEx was ordered to pay $85 million in refunds and penalties to customers and $27.5 million in fines to the government.

The Consumer Financial Protection Bureau, one of the agencies involved in the action, said federal regulators found the company had violated the law “at every stage of the experience, from shopping for cards, to applying for cards, to paying charges, to paying off debt.”

Though the payout isn’t as big, the illegal practices appear broader in scope than were identified in earlier government investigations involving Capital One and Discover.

While those earlier investigations centered on how the credit card companies marketed add-on products like payment protection, the CFPB said AmEx between 2003 and earlier this year:

  • Lied to customers, who were led to believe they’d receive both bonus points and $300 in cash if they signed up for the American Express Blue Sky credit card. There were no cash payments.
  • Charged late fees based on a percentage of the debt. This is illegal under the Credit CARD Act, which says you can’t be charged a late fee of more than $25 or more than your minimum payment, if that’s less than $25.
  • Discriminated against charge card applicants on the basis of age.
  • Failed to report customer disputes to credit bureaus.
  • Lied to customers about how repaying old debts could positively impact their credit.

From the CFPB:

“Consumers were wrongly told that if they paid off the old debt, the payment would be reported to credit bureaus and could improve their credit scores. In fact, American Express was not reporting the payments, and the debts were so old that even if they had tried to report them, many of the payments would not have appeared on these consumers’ credit reports or affected their credit scores.”

AmEx and its subsidiaries are responsible for notifying customers entitled to a refund. All payouts are expected to be made by March 15, 2013.

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