Compliance Blog

Written by Michael Coleman, Regulatory Compliance Counsel

On October 1, 2012, the CFPB announced an enforcement action against three American Express subsidiaries with orders to refund an estimated $85 million to approximately 250,000 customers for illegal credit card practices. The CFPB, the FDIC, the Federal Reserve, and the OCC have ordered civil money penalties against the three American Express subsidiaries totaling $27.5 million. The CFPB’s press release contains links to the consent orders and the stipulations for the three subsidiaries, as well as a fact sheet. 

CFPB Director Richard Cordray stated in the press release:

“Several American Express companies violated consumer protection laws and those laws were violated 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[.]”

The press release states that the American Express subsidiaries:

• Deceived consumers who signed up for the American Express “Blue Sky” credit card program
• Charged unlawful late fees
• Unlawfully discriminated against new account applicants on the basis of age
• Failed to report consumer disputes to consumer reporting agencies
• Misled consumers about debt collection

We previously blogged about the CFPB and FDIC’s joint enforcement action and consent order which required Discover Bank to refund $200 million to consumers for deceptive marketing practices. NAFCU’s September Compliance Monitor also featured an article on the CFPB’s enforcement action against Capital One Bank to refund $140 million to consumers for deceptive marketing. CFPB Bulletin 2012-06 provides an overview of the CFPB’s expectations for institutions offering credit card add-on products. Credit unions offering these products should review their current practices and determine if they are meeting the CFPB’s expectations.

In prepared remarks regarding the Discover Bank enforcement action, CFPB Director Richard Cordray stated that more enforcement actions were expected, and the CFPB has remained true to their word. However, note that the enforcement action against the American Express subsidiaries encompassed more than just violations for deceptive marketing. The American Express subsidiaries were cited for violations of several federal consumer financial laws, including age discrimination, unlawful fees, and deceptive debt collection practices. This most recent enforcement action further illustrates the CFPB’s continued focus on all aspects of credit card issuers’ practices.