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Three American Express Co. subsidiaries have agreed to pay about $75 million in restitution and penalties for a variety of illegal practices involving hundreds of thousands of credit-card customers, regulators said Tuesday.
American Express Travel Related Services Co. Inc., American Express Centurion Bank and American Express Bank were accused of unfair billing practices and deceptive marketing of add-on products, such as payment protection and credit monitoring.
The Consumer Financial Protection Bureau ordered the companies to return $59.5 million to more than 335,000 customers. The American Express subsidiaries are also paying $16.2 million in penalties to three regulatory agencies: the CFPB, Federal Deposit Insurance Corp. and Comptroller of the Currency.
“We first warned companies last year about using deceptive marketing to sell credit card add-on products, and everyone should be on notice of this issue,” said CFPB Director Richard Cordray. “Today we are refunding thousands of American Express customers who were harmed by these illegal practices. Consumers deserve to be treated fairly and should not pay for services they do not receive.”
American Express said in a statement that it has canceled the programs in question and made much of the restitution to customers.
The canceled programs include Identity Protect, Account Protector and Lost Wallet Protector, which was marketed in Puerto Rico.
“American Express continues to conduct internal reviews designed to identify issues, correct them and ensure that its products and practices meet a high standard of quality,” the company said.
The CFPB alleged that from 2000 to 2012, the subsidiaries and their vendors and telemarketers engaged in misleading and deceptive tactics to sell some of the company’s credit card add-on products. One such product, a payment protection product called “Account Protector,” allowed consumers to request that 2.5% of their outstanding balance, up to $500, be canceled if they encounter certain life events like unemployment or temporary disabilities.
American Express also marketed its “Lost Wallet” product as being able to assist card members in Puerto Rico with canceling and replacing lost or stolen credit cards, including non-American Express cards, and providing other services, such as recovering lost or stolen documents.
The regulators said the companies misled consumers about the benefits of the products, the length of coverage and the costs.
The companies were also accused of unfair billing practices related to identity protection products. The company charged many consumers for these products without written authorization, the regulators said.
In addition, the companies were accused of unfairly charging card holders interest and fees. Some unfair monthly fees pushed account balances past their limits, causing additional unfair fees and interest, the regulators said.
Miguel Gonzalez, left, waits for his appointment at an IndyMac Federal Bank in Monterey Park. IndyMac Chief Executive Michael W. Perry rarely met a nontraditional loan he didn’t like, and the Pasadena savings and loan was sucked under by stated-income mortgages that required no documentation of ability to pay. As regulators seized IndyMac in July 2008, its branches resembled scenes from the Great Depression, with panicked depositors lining up in the heat to withdraw funds. Perry staunchly denied wrongdoing, portraying himself as the victim of the housing crash and overaggressive regulators. But he agreed in December 2012 to pay $1 million to settle government claims that he overloaded IndyMac with risky loans. He was also barred from the banking industry for life. Cost: $13 billion.