American Express Hit with $113 Million for Fines, Refunds
The U.S. Consumer Financial Protection Bureau (CPFB) today announced an enforcement action against American Express Co. (NYSE: AXP) that will cost the company $27.5 million in fines and $85 million in refunds to approximately 250,000 customers. The action is the…
This action is the result of a multi-part federal investigation which found that at every stage of the consumer experience, from marketing to enrollment to payment to debt collection, American Express violated consumer protection laws.
The CPFB will receive $14.1 million of the fines, the FDIC will receive $3.9 million, and the Federal Reserve will receive $9 million, and the Office of the Comptroller will receive $500,000. The amounts are based on jurisdictional divisions.
The company has agreed to “end illegal practices” which include deceptive marketing by “falsely promising” rebates or points, not charging illegal late fees, properly reporting disputed charges to credit rating agencies and informing card customers of their rights in these disputes, and not unlawfully discriminate on the basis of age.
American Express noted in its press release that the company has established a reserve “for a substantial portion” of the fines and refunds.
Just last week Discover Financial Services (NYSE: DFS) was told to refund $200 million to 3.5 million consumers and pay a $14 million fine to the CPFB and the FDIC for deceptive marketing practices in selling credit score tracking and protection against identity theft.
The company’s shares are up 1.9% at $57.94 in a 52-week range of $41.30 to $61.42. Investors like having the certainty of an amount, and for a company with $8.5 billion in revenue in the June quarter, today’s penalty is hardly a back-breaker.
The CPFB announcement is available here.
Paul Ausick
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Paul Ausick has been writing for 247Wallst.com for more than a decade. He has written extensively on investing in the energy, defense, and technology sectors. In a previous life, he wrote technical documentation and managed a marketing communications group in Silicon Valley.
He has a bachelor's degree in English from the University of Chicago and now lives in Montana, where he fishes for trout in the summer and stays inside during the winter.
