WASHINGTON — In a rare coordinated effort Monday, the Consumer Financial Protection Bureau, all three federal banking agencies and the state regulator in Utah announced more than $112 million in enforcement penalties against American Express for card practices that allegedly violated a range of consumer protection laws.
Together, the agencies ordered three American Express subsidiaries to refund roughly $85 million to about 250,000 customers for a whole slew of alleged problems.
According to the CFPB, which has now issued three enforcement actions since its creation, the alleged violations included deception in how the company marketed its "Blue Sky" credit card program, charging unlawful late fees, age discrimination in credit scoring for new customers, failure to report consumer disputes to the credit bureaus and misleading customers in relation to debt collection.
"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," CFPB Director Richard Cordray said in a press release.
Meanwhile, the CFPB along with the primary federal regulators responsible for the targeted subsidiaries, issued civil money penalties to those institutions totaling $27.5 million.
The CFPB, Federal Deposit Insurance Corp., Federal Reserve Board, Office of the Comptroller of the Currency and Utah Department of Financial Institutions all played a role in the action against American Express. They named the card provider's subsidiary American Express Travel Related Services Company Inc. as well as two Utah-based bank subsidiaries: the state-chartered American Express Centurion Bank supervised by the FDIC, and the federally-chartered American Express Bank, FSB supervised by the OCC. (The Fed regulates American Express' holding company.)
The fines were broken down in four buckets: American Express must pay $14 million to the CFPB, $9 million to the Fed, $3.9 million to the FDIC and $500,000 to the OCC.
American Express had foreshadowed the action in a recent securities filing, saying, "Various bank regulators have been reviewing the company's card practices for compliance with certain consumer protection laws and regulations."
The FDIC informed the company in February that it planned to target Centurion Bank for an enforcement action, and the CFPB was indicating plans to act against the federally-chartered thrift, the filing said.
"In connection with these matters, ongoing discussions with regulators and the company's own internal reviews, Centurion Bank and AEBFSB have made and continue to make changes to certain of their card practices and products and established accruals for, among other costs, expected refunds to cardmembers, and the company and its subsidiaries could be required to, or otherwise determine to, make further changes to their card practices and products to respond to regulatory concerns," the company said in the filing.
Still, the action may take many by surprise as American Express has traditionally received top marks from customer satisfaction surveys.
The announcement on Monday marked the third enforcement action ever issued by the CFPB since the new consumer protection watchdog was created under the 2010 Dodd-Frank Act. All three actions have been issued against large credit card providers, and have come out in a span stretching just over two months. Unlike the actions against Capital One and Discover, which were focused on the marketing of payment protection plans, the enforcement order against AmEx was not related to a single practice.
American Express had previously faced joint orders at its two Utah subsidiaries in 2009, ordering them to pay a combined civil money penalty of $250,000. Regulators said the banks had issued checks to credit card customers that the institutions subsequently denied honoring because of changes in the customers' credit standing.