American Express has consented to refund $85 million to consumers and pay $27.5 million in fines to the CFPB and several other government agencies. The business was sued for wrongdoing that ran afoul of consumer financial regulations and is the 3rd charge card company to be sued by the fledgling Consumer Financial Protection Bureau.
Many other card businesses in court
The CFPB has already started a lot of lawsuits against financial service providers that have been breaking regulations set by other companies. The bureau is not just making brand new regulations to defend consumers.
Both Discover and Capital One have already faced lawsuits from the CFPB amounting to over $200 million in settlements. A lot of that cash is going back to consumers 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 Company and the CFPB. That suit was recently settled.
Cash handed back
In the suit, American Express is alleged to have broken numerous regulations. The charge card business was accused of discriminating against applicants over 35 years of age, making false claims about credit card rewards, charging late charges over legal limits and failing to report billing disputes to credit reporting agencies, a violation of laws concerning debt collection and reporting.
A refund will be necessary for $85 million from American Express. The business will even be paying $27.5 million in fines for the problems.
The brouhaha over late fees, according to CBS, was due to charging late charges based on a percentage but, according to CNN, subsidiaries American Express Centurian Bank and American Express Bank set the rate in excess of already established limits. American Express Centurian Bank also offered $300 to qualified consumers who were approved for an American Express “Blue Sky” card, which some customers never received.
Though it is technically discrimination, one of the subsidiaries was using a credit scoring system that was depending on age.
Another problem with debt
At American Express and its subsidiaries, there were lies being told from 2003 until now, according to CBS. The lie was that customers could increase their credit ratings if they paid off debts older than 7 years. These debts do not even show up on a credit rating after that period of time.
In March 2013, about 250,000 people will get part of the $85 million concessions, according to NBC News.
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