American Express Ordered to Pay $96 Million by CFPB
American Express has been ordered by the Consumer Financial Protection Bureau (CFPB) to pay $96 million to customers in Puerto Rico and other U.S. territories. Federal regulators said they issued the fine because two subsidiaries of American Express harmed more than 200,000 customers by charging higher interest rates, enforcing stricter credit cutoffs and offering less debt forgiveness than customers in United States received.
One discrepancy included introductory interest rates. From 2005 through 2013, more than two-thirds of the American Express credit cards available in Puerto Rico did not offer a 0% introductory interest rate, while 90% of similar cards in the U.S. mainland did offer this rate, according to the CFPB.
The regulator also found when cardholders in U.S. territories defaulted on their debt, they were forced to pay at least 73% of what they owed to settle the matter, while customers in the mainland paid about 55%.
American Express said in a statement on its website it had discovered the error in 2012 and reported it to the CFPB in 2013. The card company voluntarily paid the $95 million to customers but takes issue with the CFPB’s claim that this error “amounted to discrimination.”
“The company is committed to making its products available to every qualified person regardless of race or ethnic background, and it does not use race or ethnicity as a determining factor for credit. American Express does not tolerate discrimination in any form and is committed to ensuring that consumers are treated fairly. Having long since taken actions that the CFPB subsequently ratified, the company decided to settle with them rather than go through years of litigation that would have provided no additional value to any of its customers.”
The CFPB ordered American Express to establish new guidelines to ensure their practices were not discriminatory in the future, and pay an additional $1 million on top of the $95 million that had to be paid to customers. The CFPB admits the card company had not intentionally discriminated against customers, though, and acknowledged the issue was due to different businesses overseeing the cards in U.S. states and U.S. territories.
“Consumer financial protections are not confined within the 50 states,” said CFPB Director Richard Cordray. “American Express discriminated against consumers in Puerto Rico and the U.S. territories by providing them with less-favorable financial products and services. They have ceased this practice and are making consumers whole. In particular, because they self-reported the problem and fully cooperated with our investigation, no civil penalties are being assessed in this matter.”