The CFPB (Consumer Financial Protection Bureau) has recently ordered the giant American Express to pay more than $75 million to settle claims that were filed against them for improper fees and misleading its credit-card customers for so called add-on products like identity-fraud protection.
The bureau said American Express caused a huge problem with a product called “account protector,” which was marketed as a way for customers to wipe out their minimum monthly payment if they lost their job or had a disability.
The company will have to refund $59.5 million to more than 335,000 consumers over what the bureau called “illegal credit-card practices.” The company is also ordered to pay a $9.6 million penalty to the bureau, according to a statement issued Tuesday.
The settlement is the latest enforcement action aimed at cracking down on credit-card companies, which have come under recent scrutiny as federal regulators have sought tighter restrictions on hidden fees and penalties they issue to their customers.
But the bureau said that, in reality, the benefit payment was limited to 2.5 percent of the consumer’s outstanding balance, up to $500. In many cases, the amount that was canceled was less than the minimum payment due; which is alarming.
In addition the bureau said American Express unfairly charged interest and fees; some of which caused customers to exceed their credit limits rather easily, causing them to incur additional fees.
The agency also took issue with how the company billed for its identity-fraud protection services. The bureau said American Express began charging consumers fees for the service, sometimes for several years, even before it had obtained the authorization to actually begin monitoring the consumers’ credit records.
The CFPB said about 85 percent of customers who enrolled were billed, sometimes for several years; without receiving the benefit of the add-on.
Another product was the company’s “Lost Wallet” service, which was intended to assist card members in Puerto Rico with canceling and replacing lost or stolen credit cards; this one was inadequately marketed in Spanish.
As a result, customers were not properly informed of the steps necessary to take advantage of the product.
American Express said it has taken steps to fix the problem and will issue refunds to customers affected by the settlement or checks to consumers who no longer hold accounts with the company.