American Express’ $112 million Settlement

Federal financial regulators, alleging that American Express used illegal methods to convince consumers to settle old debt, have finally reached a settlement with American Express Centurion Bank of Salt Lake City, Utah.  According to this settlement signed by Consumer Financial Protection Bureau (CFPB) and the Federal Deposit Insurance Corporation (FDIC), approximately 250,000 customers will be refunded amounts near to $85 million dollars.  In addition American Express will pay civil court fees of $27 million. 

The settle determined that American Express was falsely telling consumers “that if they entered into an agreement to settle old debt (that was no longer being reported to consumer reporting agencies), such settlement would be reported to consumer reporting agencies and thereby improve the consumers’ credit scores.” It was alleged that American Express also knowingly entered into settlement agreements with customers “that implied that consumers who entered into settlement agreements to partially pay such debts would have the remaining balance of their debts forgiven, when in fact the balance remained a debt owed to American Express.”

This increase regulatory pressure for creditors and collection practices was one step of several that have taken place in the recent year. In fact, CFPB’s action to pursue this legal action was fresh on the heels of two more settlement agreements worth over $100 million each that were filed against national credit card companies within the past three months.  The first was Capital One, which settled on a $140 million dollar agreement in July and the second was Discover, which settled on a $200 million dollar agreement in August. 

 

American Express will now be forced to forgive the debt it allegedly promised to forgive in the first place and consumers who had been denied American Express cards based on this unforgiven debt will receive $100, along with a pre-approved offer for an American Express card.