Credit card giant American Express Co. has agreed to refund $85 million to 250,000 customers and pay $27.5 million in civil penalties after federal and state regulators determined numerous violations of consumer protection laws.
Among the alleged infractions were misleading some people who signed up for the company's Blue Sky credit card program into believing they would get a $300 payment they never received, charging improper late payments and deceiving customers about the benefits of paying off old debts, the regulators said.
The violations took place "at all stages of the games -- from the moment a consumer shopped for a card to the moment the consumer got a phone call about long overdue debt," said Richard Cordray, director of the Consumer Financial Protection Bureau.
The agency was among several regulators that conducted the investigation, which involved three American Express subsidiaries -- American Express Centurion Bank, American Express Travel Related Services Co., and American Express Bank.
The action against American Express was the third by the new consumer bureau involving major credit card companies.
Last week, Discover Financial Services agreed to refund $200 million to credit card customers and pay a $14-million civil penalty for violations related to add-on products, such as payment-protection plans.
And in July, Capital One agreed to refund $150 million to credit card customers and pay $60 million in civil fines for deceptive marketing practices.
As part of a consent order, American Express agreed to end the practices and refund money directly to consumers by March 15. People who are still American Express customers will get a credit on their account. People who are no longer customers will receive a check.
"The company is strengthening its internal compliance processes and will continue to work closely with its regulators," American Express said in a statement.
The company did not admit or deny the violations as part of the consent orders with the consumer bureau, the Federal Deposit Insurance Corp., the Office of the Comptroller of the Currency, theFederal Reserve and the Utah Department of Financial Institutions.
About 50% of the refund money will go to customers who were charged late fees on certain cards by American Express Centurion Bank and American Express Bank based on a percentage of the debt, which is against the law. Those customers will get the improper late fee refunded, with interest.
Approximately 30% of the refunds will go to consumers who were misled about debt collection.
For example, some customers were told American Express would report any payments of old debt to credit reporting companies. But American Express did not report the payments, some of which were on debt too old to improve customers' credit scores.
Other customers were incorrectly told some old debt would be forgiven if they accepted certain settlement offers from the company. Customers will get their debt payments refunded, with interest. And any customer who was denied a credit card because old debt was not forgiven as promised would get $100 and a pre-approved offer for a new American Express card.
The rest of the settlement money will go to Blue Sky customers, who will get the promised $300 if they did not receive it, regulators said.