Shareholder Sues AmEx Board on Credit Card Practices
A shareholder of American Express is suing the company’s Board of Directors and Chairman Kenneth Chenault, claiming they did not properly oversee the practices that led to a recent $112.5 million settlement with consumers and four federal agencies.
Bob Lankford, a shareholder for 16 years, filed the suit yesterday in the New York State Supreme Court, asking for unspecified damages.
According to Bloomberg, the investor wants the court “to take all necessary actions to reform and improve its corporate governance and internal procedures to comply with applicable laws and to protect the company and its shareholders from a repeat of the damaging events.”
On October 1, it was announced that American Express would refund $85 million to customers and pay $27.5 million in civil penalties to settle regulators’ accusations that the company violated a number of consumer protection laws.
The company led customers to believe they would receive $300 for signing up for the Blue Sky credit card. The customers who fulfilled the conditions of the offer never received the money. In addition, American Express was accused of making false statements to persuade customers to pay off their credit card balances. The regulators said customers were told that if they agreed to pay off part of their debt, the remaining portion of the balance would be forgiven. The company also failed to report cardholder disputes to the proper reporting agencies and engaged in possible age discrimination against consumers applying for new card accounts. The violations began in 2003.
The $85 million will be refunded to approximately 250,000 cardholders. The $27.5 million in fines will be dispersed to the four federal agencies that took part in the investigation: $9 million to the Federal Reserve, $14 million to the Consumer Financial Protection Bureau, $3.9 million to the Federal Deposit Insurance Corporation and $500,000 to the U.S. Office of the Comptroller of the Currency.