The Consumer Financial Protection Bureau has ordered American Express to pay more than $75 million to settle claims that it charged improper fees and misled its credit card customers over so-called add-on products like identity fraud protection.
American Express will have to refund $59.5 million to more than 335,000 consumers over what the bureau called “illegal credit card practices.†American Express will also have to pay a $9.6 million cash penalty to the bureau, according to a statement issued on Tuesday.
The settlement is the latest government enforcement action aimed at cracking down on credit card firms, which have come under tougher scrutiny as federal regulators have sought tighter restrictions on hidden fees and penalties.
The bureau said one problematic product involved American Express’s “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.
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, that amount that was canceled was less than the minimum payment due. The bureau also says American Express unfairly charged interest and fees, some of which caused customers to exceed their credit limits, resulting in additional fees.
The agency also took issue with how American Express billed for its identity fraud protection services. The bureau said that American Express began charging consumers fees for the service, sometimes for several years, even before it had obtained the authorization necessary to begin monitoring the consumers’ credit information.
About “85 percent of consumers who enrolled in the identity protection products paid the full product fee without receiving all of the advertised benefits,†the bureau said in a statement. “In some cases, consumers paid for these services for several years without receiving all of the promised benefits.â€
Another product was the company’s “Lost Wallet†product, which was intended to assist card members in Puerto Rico with canceling and replacing lost or stolen credit cards. The bureau said that product was not adequately marketed in Spanish. As a result, customers were not properly informed of the required steps necessary to take advantage of the product.
American Express said it had taken steps to rectify the problems. It will also issue refunds to customers who were affected by the settlement, or checks to consumers who no longer hold accounts with the company.
“As previously reported, American Express continues to conduct internal reviews designed to identify issues, correct them and ensure that its products and practices meet a high standard of quality,†the company said in a statement.
In addition to paying penalties and reimbursements, American Express was ordered to hire an independent third party to review the company’s add-on products.
The agency said the settlement covered consumers who were customers from 2000 to 2012. The company will also pay $3.6 million to the Federal Deposit Insurance Corporation and $3 million to the Office of the Comptroller of the Currency, which worked with the bureau on the investigation.
This isn’t the first time American Express has come under fire for its credit card business. Last year, the consumer protection agency ordered the company to return $85 million to consumers who had been the victims of illegal marketing, billing and debt collection practices.
