American Express Bank, FSB

Documents in this case

• Consent order · 28 p.
• Stipulation · 3 p.
• Document · Aug. 2017 · 1 p.

Case summary

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.

Consent order

PDF of this document (28 pages)

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UNITED STATES OF AMERICA Before the CONSUMER FINANCIAL PROTECTION BUREAU ADMINISTRATIVE PROCEEDING File No. 2012-CFPB-0003 In the Matter of:

AMERICAN EXPRESS BANK, FSB SALT LAKE CITY, UTAH ) ) ) ) ) ) ) ) ) ) ) _________________________________ ) CONSENT ORDER, ORDER FOR RESTITUTION, AND ORDERTOPAY CIVIL MONEY PENALTY The Consumer Financial Protection Bureau ("CFPB") has jurisdiction over American Express Bank, FSB ("AEBFSB" or "the Bank") pursuant to section 1002(6), 1025 and 1053(b) of the Consumer Financial Protection Act ("CFP Act"), 12 U.S.C. §§ 5481(6), 5515 and 5563(b). I. OVERVIEW The CFPB finds that AEBFSB has engaged in violations of various federal consumer financial laws, including violations of:

(1) Sections 1031 and 1036 of the CFP Act ("Sections l 031 and 1 036"), 12 U.S.C. §§ 5531 and 5536, for deceptive debt collection practices; (2) The Truth in Lending Act ("TILA"), as amended by the Credit CARD Act of2009, 15 U.S.C. §§ 1601 et seq., and section 1026.52(b)(l) ofRegulation Z,

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12 C.F.R. § 1 026.52(b)(l), 1 for charging unlawful late fees on certain hybrid charge cards; and (3) The Fair Credit Reporting Act ("FCRA"), 15 U.S.C. §§ 1681 et seq., for failing to report certain consumer disputes to consumer reporting agencies ("CRAs"). The CFPB further finds that the Bank has failed to manage its compliance with Federal consumer financial laws and regulations adequately relating to the Bank's Compliance Risk Management Program ("CRMP") and the Bank's oversight of affiliate and third-party service providers ("Service Providers").

FINDINGS OF FACT Based on the CFPB's targeted review of AEBFSB and resulting Supervisory Letter dated June 14, 2012 ("Supervisory Letter"), the CFPB fmds the following facts: (1) Deceptive Debt Collection Practices. In connection with the collection of consumer debt:

(a) Unreported Debt shall mean consumer debt that has been in collections or charged off and is no longer being reported by the Bank to CRAs. AEBFSB misrepresented to certain customers that settlement of Unreported Debt would be reflected on the consumers' credit report and that payment could improve the consumers' credit score; and (b) Certain debt settlement letters that stated that after settlement, the consumers' remaining debt would be "waived" or "forgiven" were misleading because the Bank 1 Effective December 30,2011, the Consumer Financial Protection Bureau republished some of the existing regulations implementing Federal consumer financial laws, including Regulation Z, in Chapter X ofTitle 12 of the Code of Federal Regulations. All citations to these regulations will refer to the republished regulations for ease of reference.

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failed to prominently disclose that the consumer must pay the full debt balance before the Bank would process any future credit or charge card application. (2) Excessive Hybrid Card Late Fees. AEBFSB offered consumers the option of having a hybrid account for a charge card with revolving credit features that allowed the consumers to pay a portion of their outstanding balances over time ("Hybrid Card"). Under section 1026.52(b)(l) of Regulation Z, AEBFSB is permitted to charge consumers with these accounts a late fee based on costs or based on a safe harbor provided in the regulation. Instead of basing the fees on cost or charging fees of a specified dollar amount as permitted by the safe harbor, AEBFSB unlawfully charged consumers 2.99% of a portion of their delinquent balance. (3) Reporting of Credit Disputes. FCRA requires a creditor to report to CRAs if a consumer disputes information it reported to the CRAs. AEBFSB created a system that failed to report to the CRAs when a consumer disputed information. Depending on AEBFSB's investigation of the dispute, AEBFSB either asked the CRAs to delete the information, or AEBFSB reported the information to the CRAs without indicating the dispute in violation of FCRA.

(4) Board and Management Oversight. The Bank's Board ofDirectors ("Board") and senior management exercised ineffective oversight and control over the compliance function, pat1icularly the oversight of AEBFSB Service Providers.

(5) Compliance Program. The Bank's CRMP is deficient, with problems in the implementation and compliance with policies and procedures. The Bank failed to implement an effective employee training program for applicable consumer protection laws and implementing rules and regulations, regulatory guidance and statements of policy ("Consumer Protection Page 3 of28

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Laws"). In addition, the Bank has failed to adequately monitor consumer complaints and inquiries.

(6) Compliance Staffing. The position of Chief Compliance Officer has turned over frequently, which adversely affects the Bank's compliance with Consumer Protection Laws. Staffing for compliance monitoring is inadequate.

(7) Oversight of Service Provider Agreements and Services. Most of the Bank's consumer operations are performed or directed by affiliates and service providers. All violations identified in the Supervisory Letter are attributed to deficient management oversight of the Bank's Service Providers.

(8) Consumer Harm. Approximately 20,000 consumers were adversely impacted by the Bank's actions and at least $10,000,000 was collected by the Bank in violation of applicable Consumer Protection Laws.

STIPULATION The Bank, by and through its duly elected and currently acting Board, has executed a Stipulation to the Issuance of a Consent Order, Order for Restitution, and Order to Pay Civil Money Penalty ("Stipulation"), dated September 27, 2012, that is accepted by the CFPB. With the Stipulation, the Bank has consented, without admitting or denying any findings of fact, violations of laws or regulations, to the issuance of the Consent Order, Order for Restitution, and Order to Pay Civil Money Penalty (collectively "Orders") by the CFPB. Having determined that the requirements for issuance of an order under section 1 053(b) of the CFP Act, 12 U.S.C. § 5553(b) has been satisfied, the CFPB, therefore, accepts the Stipulation and issue the following orders:

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II.

CONSENT ORDER CORRECTIONS OF VIOLATIONS OF LAWS IT IS HEREBY ORDERED that the Bank, its officers, agents, servants and employees immediately cease and desist and the Bank ensure that its Service Providers or other agents immediately cease and desist from engaging violations of law and/or regulations, as more fully set forth in the Supervisory Letter, and it is further ordered that the Bank take affirmative actions as of the date of issuance of the Orders ("Effective Date"), unless otherwise specified, as follows:

l.

The Bank shall correct all violations of law, as more fully set forth in the Supervisory Letter and as described below, and shall implement procedures to prevent their recun·ence. The Bank's actions as required by this paragraph shall be satisfactory to the Regional Director, West Region, of the CFPB ("CFPB Regional Director") as determined at subsequent examinations and/or visitations.

Deceptive Acts and Practices 2.

The Bank shall take all action necessary to eliminate all violations of Sections 1031 and 1036. In addition, the Bank shall take all necessary steps to effect and maintain future compliance with Sections 1031 and 1036 as described more particularly herein. Debt Collection Practices 3.

The Bank shall continue to provide disclosures concerning the expiration of the Bank's litigation rights when collecting debt that is barred by applicable state statutes of limitations and shall take all action necessary to ensure the revision of any and all solicitations and any other oral, written or electronic communications used in connection with the collection of consumer debts to remove all deceptive statements and to disclose clearly and prominently: Page 5 of28

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(a) All material conditions, benefits and restrictions concerning any offer of settlement; and, (b) When collecting on Unreported Debt, the following language: The law limits how long a debt can be reported to a consumer reporting agency. Because of the age of your debt, we cannot report it to a consumer reporting agency. Payment or non-payment of this debt will not affect your credit score.

4.

For purposes of the Consent Order, "clearly and prominently" shall mean: (a) As to written information, written in a type size and location sufficient for an ordinary consumer to read and comprehend it, and disclosed in a manner that would be easily recognizable and understandable in language and syntax to an ordinary consumer. If the inf01mation is contained in a multi-page print document, the disclosure appears on the first page; and (b) As to information presented orally, spoken and disclosed in a volume, cadence and syntax sufficient for an ordinary consumer to hear and comprehend. 5.

The Bank shall not make any representation or statement, or take any other action that interferes with, detracts from, contradicts, or otherwise obscures the disclosures required in paragraph 3.

6.

The Bank shall maintain accurate and complete information on each consumer debt that the Bank collects or attempts to collect. Such information shall include, at a minimum: (a) consumer agreements and any subsequent amendments and (b) documentation evidencing the debt and each transaction or activity on the debt. The Bank shall make such information and/or documentation available upon request to a consumer inquiring about his/her debt.

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For debts incurred prior to the Effective Date, the Bank may collect or attempt to collect such debts if the Bank has evidence to verify the debt, but must immediately cease such collection efforts if the consumer disputes the debt and the Bank is unable to provide the documentation in subparagraphs 6(a) and (b) above.

7.

The Bank shall provide a copy of the Orders to any person to whom the Bank sells, transfers, or assigns any debt which would require the disclosures in paragraph 3 and/or be subject to the provisions of paragraph 6 and shall require in all contracts to sell, transfer, or assign such debt a provision that contains a clear and prominent notification to the buyer, transferee, or assignee that the Bank is expressly requiring that the disclosures in paragraph 3 be given by any person collecting such debt and requiring that the provisions of paragraph 6 apply to the debt.

8.

For any Unreported Debt, the Bank shall not in the future repo11 any activity to the CRAs.

Truth in Lending 9.

The Bank shall take all action necessary to eliminate all violations of TILA and Regulation Z. In addition, the Bank shall take all necessary steps to effect and maintain future compliance with TILA and Regulation Z as described more particularly herein. Hybrid Card Late Fees 10.

The Bank shall take all action necessary to ensure that it is complying with the limitations on late fees set forth in Regulation Z section 1 026.52(b )(1) for any charge card account that also contains a revolving credit feature.

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Fair Credit Reporting Act Reporting of Credit Disputes 11.

The Bank shall take all action necessary to eliminate all violations of FCRA and to maintain future compliance with FCRA.

12.

The Bank shall take all action necessary to ensure that consumer disputed information is not furnished to consumer reporting agencies without a notice of the dispute to ensure compliance with section 623(a) ofFCRA.

Remediation Plan for Reporting of Credit Disputes 13.

The Bank shall provide every consumer card holder who has an open account, who has a closed account with a balance that the Bank reports to a CRA, or who has a closed account with no balance but for whom the Bank reported negative information to a CRA within the past seven years with an advisement of rights under FCRA in a form that is acceptable to the CFPB Regional Director. This advisement of rights should be mailed or transmitted to consumers within three complete billing cycles or three months of its approval by the CFPB Regional Director and shall inform consumers that they have a right to dispute inaccurate infonnation on their credit reports, and should they dispute the information to the Bank, the Bank will r~pott the dispute to the CRAs, as required by law. COMPLIANCE MANAGEMENT SYSTEM IT IS FURTHER ORDERED that the Bank take additional affirmative actions as follows:

Compliance Program 14.

Within 60 days from the Effective Date, the Bank shall review, revise, develop and/or implement, as necessary, a sound risk-based Compliance Risk Management Program Page 8 of28

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("CRMP") including a comprehensive written compliance program ("Compliance Program") to ensure that its activities comply with Sections 1031 and 1036 and otherwise ensure compliance with all Consumer Protection Laws to which the Bank is subject. At a minimum, the Compliance Program shall provide for and include:

(a) Comprehensive, written policies and procedures designed to prevent violations of Consumer Protection Laws and prevent associated risks of harm to consumers; (b) An effective training program that includes regular, specific, comprehensive training in Consumer Protection Laws commensurate with individual job functions and duties for appropriate Bank personnel, including all individuals having responsibilities that relate to Consumer Protection Laws, senior management and the Board; (c) An enhanced and well-documented internal CRMP monitoring process incorporated into the daily work of Bank personnel that is designed to detect and promptly correct compliance weaknesses within the Bank and Service Providers, particularly weaknesses that impact consumer accounts;

(d) An effective consumer complaint monitoring process, including the maintenance of adequate records of all written, oral, or electronic complaints or inquiries, formal or informal, received by the Bank and all Service Providers and the resolution of the complaints and inquiries; and (e) Effective independent audit coverage of the Compliance Program and the Bank's compliance with all Consumer Protection Laws and internal policies and procedures. 15.

The Bank shall implement and comply with the written Compliance Program and/or any subsequent modification thereto upon approval of the Compliance Program by the Board.

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16.

Within 15 days from the Effective Date, the Bank shall retain an independent third party ("Compliance Program Consultant"), acceptable to the CFPB Regional Director, to assist in the development, revision, review and implementation of the Bank's Compliance Program. The Compliance Program Consultant shall provide a detailed written repott of the Bank's adherence to the Compliance Program to the Board ("Compliance Program Report") on a monthly basis. The Board of Directors shall conduct a full and complete review of the Compliance Program Repott within 30 days of receipt. This review shall be recorded and noted in the Board minutes.

17.

Within 30 days from the Effective Date, the Bank shall retain an independent third party ("Compliance Staffmg Consultant"), acceptable to the CFPB Regional Director, who possesses the appropriate expertise and qualifications to review, analyze and assess the Bank's compliance staffing, and determine if additional personnel are needed. The Compliance Staffing Consultant shall provide to the Board a detailed written report containing its analysis, assessments, and recommendations ("Staffing Report"). The Board of Directors shall conduct a full and complete review of the Staffing Report within 30 days of receipt. This review shall be recorded and noted in the Board minutes.

Board Oversight Compliance Risk Management Program 18.

The Board shall participate fully in the oversight of the Bank's CRMP and shall be responsible for the approval of sound policies and objectives and for the supervision of all the Bank's compliance-related activities, consistent with the role and expertise commonly expected for directors of banks of comparable size and complexity and offering comparable banking products and services.

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19.

Prior to implementation, the Board shall review the written Compliance Program and/or any subsequent modification thereto. If the Board determines that the Compliance Program and/or any subsequent modification thereto is acceptable, the Board shall approve it and record the approval in the Board minutes.

Compliance Committee & Stajjing 20.

Within 30 days from the Effective Date, the Board shall maintain a compliance committee comprised of at least three directors, who are not officers of the Bank, and at least one member of senior management, plus the Chief Compliance Officer ("Compliance Committee"). (a) The Compliance Committee shall meet monthly and, at a minimum, the following areas shall be reviewed and approved: minutes of the Compliance Committee, Chief Compliance Officer reports, Compliance Program audit reports, Compliance Program policies, and progress reports concerning compliance with the Consent Order. (b) The Compliance Committee shall report its discussions to the Board at each regularly scheduled Board meeting, and the Board minutes shall document the review and approval of all items before the Board, including the names of any dissenting directors. Nothing shall diminish the responsibility of the entire Board to ensure compliance with the provisions of the Consent Order.

(c) The Board, in conjunction with the Compliance Committee, shall allocate resources that are commensurate with the level of complexity of the Bank's operations to ensure the establishment and implementation of an adequate CRMP, as described in the CFPB Supervision and Examination Manual Part II, and shall include specific procedures to ensure the Bank's compliance with all Consumer Protection Laws. The allocated resources shall be sufficient to ensure the Bank's timely compliance with the Consent Order. Page 11 of28

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(d) The Board, in conjunction with the Compliance Committee, shall: (i) Ensure that the Bank has a qualified Chief Compliance Officer who possesses the requisite knowledge and experience to administer an effective CRMP for a large bank, as defined in 12 U.S.C § 5515(a)(l); (ii) Ensure that the duties and responsibilities of the Chief Compliance Officer are clearly defined and provide the Chief Compliance Officer access to both the Board and the Compliance Committee;

(iii) Ensure that the Chief Compliance Officer have and retain sufficient authority and independence to implement policies related to Consumer Protection Laws and to institute con·ective action as needed. This authority shall include the ability to cross departmental lines, have access to all areas of the Bank's operations, and effectuate corrective action upon discovering deficiencies;

(iv) Ensure that the Chief Compliance Officer and all individuals with compliance oversight responsibilities receive ongoing training, sufficient time, and adequate resources to effectively oversee, coordinate, and implement the Bank's CRMP; (v) Require the Chief Compliance Officer to provide to the Compliance Committee monthly written reports, including, but not limited to, reports related to the enactment and/or promulgation of new Consumer Protection Laws and changes to existing Consumer Protection Laws, training performed, monitoring and compliance audits performed, corrective action taken, and compliance with the Consent Order; (vi) Ensure proper and timely follow-up and resolution to audit and examination findings indicating the need for con·ective action(s); and Page 12 of28

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(vii) Develop and implement an internal monitoring system of employees' performance to ensure that compliance policies, procedures and regulatory requirements are adequately followed and hold employees accountable for following adopted policies, procedures and regulatory requirements. Oversight of Service Provider Agreements And Services 21.

Within 60 days from the Effective Date, the Bank shall develop policies to maintain effective monitoring, training, record-keeping and audit procedures to review each aspect of the Bank's agreements with its Service Providers and the services performed for the Bank pursuant to these agreements ("Service Provider Agreements and Services"). The policies and procedures shall, at a minimum, provide for:

(a) Bank prior review and approval of copies of (i) all Bank marketing and solicitation materials, including direct mail or internet solicitations, promotional materials, advertising, telemarketing scripts ("Marketing and Solicitation Materials"), and (ii) other materials provided by the Bank to consumers generated in connection with the administration and servicing of the Service Provider Agreements and Services; (b) Maintenance of records of all Service Provider agreements ("Service Provider Agreements") and approved Marketing and Solicitation Materials, including any changes or amendments with respect to such materials; (c) Monitoring the performance of marketing and solicitation programs for new accounts;

(d) Prompt notification to the Bank by any Service Provider of all regulat01y agencies' inquiries, customer complaint/inquiry correspondence, and/or legal action received by any Service Provider with respect to charge and credit card programs (other than routine requests Page 13 of28

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such as requests to cease and desist collection contact), and maintenance by the Bank of all such documents;

(e) Procedures for promptly addressing and resolving consumer complaints and inquiries, regardless of the source;

(f) Procedures for monitoring and auditing of collection activities and customer service call centers;

(g) Bank review of all Service Provider charge and credit card program partners' credit, fraud, and risk management materials, including policy manuals and procedures, to determine compliance with all Consumer Protection Laws; and (h) An effective training program that includes regular, specific, and comprehensive training in Consumer Protection Laws for all employees of Service Providers having responsibilities that relate to Consumer Protection Laws, including senior management, commensurate with their individual job functions and duties. 22.

The Bank's Compliance Committee shall, on a quarterly basis, submit a written report to the Board detailing whether Service Providers are in compliance with Service Provider Agreements. The written report shall include potential violations, deficiencies, customer complaints and inquiries, or other concerns. The Board shall be responsible for ensuring that corrective actions are taken to address the fmdings of the written report and for assuring that a sound annual review of compliance-related Service Provider Agreements is performed. Management and Management Study 23.

The Bank shall have and retain qualified management. Each member of management shall have the qualifications and experience commensurate with his or her duties Page 14 of28

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and responsibilities within the Banlc The Board shall provide each member of management the appropriate written authority to implement the provisions of the Orders. 24.

The qualifications of individual members of management shall be assessed on each individual's ability to:

(a) Comply with the requirements of the Orders and (b) Effectuate the Bank's compliance with applicable laws, rules and regulations.

25.

Within 30 days from the Effective Date, the Board shall retain an independent third party ("Management Consultant"), acceptable to the CFPB Regional Director, to provide a detailed study of the Bank ("Management Study") to determine whether existing Bank management has the resources, skills and experience to return the Bank to a satisfactory compliance position. The Management Study shall include, at a minimum, a review of the duties, responsibilities, qualifications, and remuneration of the Bank's senior officers. The Management Study shall also review the authority of management to make necessary compliance changes vis-a-vis Service Providers.

26.

Within 30 days of receiving the Management Study, the Board shall adopt a plan to implement any recommendations of the Management Study or shall explain in writing signed by all Board members why a particular recommendation is not being implemented. Independent Audit Program 27.

Within 30 days from the effective date of the Consent Order, the Bank shall schedule independent audits to be conducted at least annually to ensure compliance with Consumer Protection Laws. The audits shall be conducted by qualified personnel with experience in conducting independent audits of compliance programs of banks of comparable Page 15 of28

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size. The audits identified on the schedule will assess the Bank's CRMP and Compliance Program, and at a minimum, shall:

(a) Define a comprehensive scope to include appropriate aspects of each law or regulation based on a risk analysis;

(b) Identify the number of transactions sampled by category or product type; (c) Identify deficiencies;

(d) Provide descriptions of or suggestions for corrective actions and timeframes for correction; and (e) Establish follow-up procedures to verify that corrective actions are implemented and effective.

28.

Audit findings, deficiencies, and recommendations must be documented in a written report and provided to the Bank's Board and Audit Committee within 15 days after completion of the independent audit. In addition, the audit report should be thoroughly reviewed by the Bank's Board and fully documented in the Board's minutes. 29.

Within 45 days from receipt of the independent auditor's written report, the Board shall ensure that management takes action to address the audit's findings and develop and implement a plan to: (i) correct any deficiencies noted; and (ii) implement any recommendations or explain in writing signed by all Board members why a particular recommendation is not being implemented.

III.

ORDER FOR RESTITUTION RESERVEACCOUNTANDPAYMENTFLOOR 30.

Within 10 days from the effective date of the Order for Restitution ("Restitution Order"), the Bank shall reserve or deposit into a segregated deposit account an amount not less Page 16 of28

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than $10,000,000 ("Payment Floor") for the purpose of providing restitution as required by the Restitution Order.

31.

The Bank shall make all restitution payments required by the Restitution Order, regardless of whether the total of such payments exceeds the Payment Floor. If the total of payments is less than the Payment Floor, the excess shall be returned to the Bank's general funds.

RESTITUTION PLAN FOR COLLECTION OF UNREPORTED DEBT 32.

Within 30 days from the Effective Date, the Bank shall prepare a comprehensive Restitution and Other Relief Plan ("Unreported Debt Restitution Plan") for all Unreported Debt Eligible Consumers. Unreported Debt Eligible Consumers are defined as all individuals who made payment on an Unreported Debt at any time following the receipt of a Debt Forgiveness Solicitation or an Unreported Debt Solicitation. A Debt Forgiveness Solicitation is a settlement solicitation on or after January 1, 2003 that includes: (a) the use of the words "waive," "forgiveness," or "save;" and (b) language substantially similar to a sentence stating, "No attempts will be made to collect the remaining balance which would need to be paid before American Express processes any future applications that you may choose to submit for an American Express account(s) or that an employer may submit on your behalf for an American Express Corporate Card." An Unreported Debt Solicitation shall mean a solicitation on or after January 1, 2003 that includes language substantially similar to a sentence stating, "We will report your settlement agreement to credit bureau agencies." Reimbursement shall be calculated through June 30, 2012 ("Unreported Debt Cut-Off Date"). The Bank shall submit the Unrepotted Debt Restitution Plan, including samples of letters to consumers, to the CFPB Regional Director for review, comment and non-objection prior to implementation. Page 17 of28

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33.

The Unreported Debt Restitution Plan shall, at a minimum, require the Bank to reimburse payments made by Unreported Debt Eligible Consumers from the date the Unreported Debt Solicitation was mailed to the Unreported Debt Eligible Consumer until the Unreported Debt Cut-OffDate plus 1.3% interest.

34.

Within 90 days of receipt of non-objection from the CFPB Regional Director, the Bank shall implement the Unrepmted Debt Restitution Plan. Any required cash restitution amount shall be provided to each of the Unreported Debt Eligible Consumers in the form of a certified or bank check. Restitution provided by the Bank shall not limit consumers' rights in any way.

35.

The Bank shall retain for seven years all records pertaining to the Unreported Debt Restitution Plan, including but not limited to: documentation of the processes and procedures used to determine the Unreported Debt Eligible Consumers; the names, contact, and account information of the Unreported Debt Eligible Consumers; any mailing records; and documentation that the appropriate restitution and equitable relief were made. 36.

After providing restitution on any Unreported Debt pursuant to paragraph 32 of the Consent Order the Bank may resume non-deceptive collection efforts to recover such Unrepotted Debt in a manner compliant with this Order. 37.

Providing restitution under this plan shall not create any new collection, consumer reporting or litigation rights on behalf of the Bank. RESTITUTION PLAN FOR DEBT FORGIVENESS SOLICITATIONS 38.

Within 30 days from the Effective Date, the Bank shall prepare a comprehensive Restitution and Other Relief Plan ("Debt Forgiveness Restitution Plan") for all Debt Forgiveness Eligible Consumers. Debt Forgiveness Eligible Consumers are defmed as all individuals who Page 18 of28

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made payment on a consumer debt at any time following the receipt of a Debt Forgiveness Solicitation. The Bank shall submit the Debt Forgiveness Restitution Plan, including samples of letters to consumers, to the CFPB Regional Director for review, comment and non-objection prior to implementation.

39.

The Debt Forgiveness Restitution Plan shall, at a minimum, require the following elements:

(a) For Debt Forgiveness Eligible Consumers who settled their accounts and did not apply for a new credit or charge card, the Bank shall not deny future applications for credit because only the Settlement Amount was paid. (b) For Debt Forgiveness Eligible Consumers who settled their accounts, applied for and, according to Bank records, were denied a new credit or charge card, the Bank shall:

(i) Pay $1 00;

(ii) Not deny future applications for credit because only the Settlement Amount was paid; and (iii) Make a pre-approved offer for a new credit card with terms acceptable to the CFPB Regional Director.

(c) For Debt Forgiveness Eligible Consumers who settled their accounts and made payments in excess of the Settlement Amount, applied for and, according to Bank records, were denied a new credit or charge card, the Bank shall: (i) Pay $1 00;

(ii) Not deny future applications for credit because only the Settlement Amount was paid;

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(iii) Make a pre-approved offer for a new credit card with terms acceptable to the CFPB Regional Director; and (iv) Reimburse all payments made in excess of the Settlement Amount plus 1.3% interest.

(d) For Debt Forgiveness Eligible Consumers who settled their accounts and were subsequently issued an American Express card, the Bank shall reimburse all payments made in excess of the Settlement Amount plus 1.3% interest. 40.

Within 90 days of receipt of non-objection from the CFPB Regional Director, the Bank shall implement the Debt Forgiveness Restitution Plan. Any required cash restitution amount shall be provided to each of the Debt Forgiveness Eligible Consumers in the form of a cer1ified or bank check. Restitution provided by the Bank shall not limit consumers' rights in any way.

41.

The Bank shall retain for seven years all records pertaining to the Debt Forgiveness Restitution Plan, including but not limited to: documentation of the processes and procedures used to determine the Debt Forgiveness Eligible Consumers; the names, contact, and account infonnation of the Debt Forgiveness Eligible Consumers; any mailing records; and documentation that the appropriate restitution and equitable relief were made. RESTITUTION PLAN FOR HYBRID CARD LATE FEES 42.

Within 30 days from the Effective Date, the Bank shall prepare a comprehensive Restitution and Other Relief Plan ("Hybrid Card Late Fees Restitution Plan") for all eligible consumers ("Hybrid Card Late Fees Eligible Consumers"). Hybrid Card Late Fees Consumers are defined as all individuals who paid a 2.99% late fee on a Hybrid Card. Reimbursement shall be calculated through December 10, 2011 ("Hybrid Card Late Fees Cut-Off Date"). The Bank Page 20 of28

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shall submit the Hybrid Card Late Fees Restitution Plan, including samples of letters to consumers, to the CFPB Regional Director for review, comment and non-objection prior to implementation.

43.

The Hybrid Card Late Fees Restitution Plan shall, at a minimum, require the Bank to reimburse to Hybrid Card Late Fees Eligible Consumers payments from August 22, 2010 to December 10,2011 of late fees in excess of$35 per late fee plus 1.3% interest calculated from the date the fee was charged until the date of reimbursement. 44.

Within 90 days of receipt of non-objection from the CFPB Regional Director, the Bank shall implement the Hybrid Card Late Fees Restitution Plan. Any required cash restitution amount shall be provided to each of the Hybrid Card Late Fees Eligible Consumers in the form of an account credit up to the amount of the account's outstanding balance, and a certified or bank check for any restitution that exceeds the outstanding balance. Restitution provided by the Bank shall not limit consumers' rights in any way.

45.

The Bank shall retain for seven years all records pertaining to the Hybrid Card Late Fees Restitution Plan, including but not limited to: documentation of the processes and procedures used to determine the Hybrid Card Late Fees Eligible Consumers; the names, contact, and account information of the Hybrid Card Late Fees Eligible Consumers; any mailing records; and documentation that the appropriate restitution and equitable relief were made. REVIEW OF RESTITUTION PLANS 46.

Prior to submission to the CFPB Regional Director, the Unrep011ed Debt Restitution Plan, Debt Forgiveness Restitution Plan, and the Hybrid Card Late Fees Restitution Plan (collectively, "Restitution Plans") shall be reviewed by the Compliance Program Consultant retained in paragraph 16 of the Consent Order.

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MAILING REFUNDS 47.

Within 30 days from the effective date of the Restitution Order, the Bank shall submit to the CFPB Regional Director for review a plan for mailing refunds, including the proposed text of letters that shall be sent to Eligible Consumers regarding restitution checks or account credits. Such letters shall include satisfactory language explaining the reason the Bank is sending a restitution check or crediting an account, including that the Bank is sending the check or crediting an account as the result of an enforcement action by the CFPB. The letters shall also include reference to and the web addresses for any CFPB press releases related to the Restitution Order. The Bank shall then address any comments of the CFPB Regional Director, making such changes as may be required to the proposed letters. The letters, incorporating any changes that may be required in response to comments by the CFPB Regional Director, shall be sent by mail to all Eligible Consumers entitled to receive restitution checks and/or credits to their accounts in accordance with the Restitution Order.

48.

When the Bank makes cash restitution by certified or bank check made payable to any consumer receiving restitution under the Restitution Order ("Eligible Consumer"), AEBFSB shall send the certified or bank check by United States Postal Service first-class mail, address correction service requested, to the Eligible Consumer's last address as maintained by the Bank's records. The Bank shall make reasonable attempts to obtain a cunent address for any Eligible Consumer whose notification letter and/or restitution check is returned for any reason, using standard address search methodologies, and shall promptly re-mail all returned letters and/or restitution checks to current addresses, if any. If the certified or bank check for any eligible consumer is returned to the Bank after such second mailing by the Bank, or if a cunent mailing Page 22 of28

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address cannot be identified using standard address search methodologies, the Bank shall retain the restitution amount of such Eligible Consumer for a period of three-hundred sixty (360) days from the date the restitution check was originally mailed, during which period such amount may be claimed by such Eligible Consumer upon appropriate proof of identity. After such time these monies will be disposed of in accordance with the applicable Restitution Plan in the Restitution Order.

INDEPENDENT CERTIFIED ACCOUNTING FIRM Engagement of Firm 49.

Within 45 days from the Effective Date, the Bank shall retain, at its expense, an independent ce11ified accounting fum ("Firm") acceptable to the CFPB Regional Director to determine compliance with the Restitution Plans. The Firm shall dete1mine compliance in accordance with the attestation standards established by the American Institute of Certified Public Accountants for agreed-upon procedures for engagements. 50.

Prior to the engagement of the Firm, and no later than 30 days from the issuance of the Restitution Order, the Bank shall submit the name and qualifications of the Firm, together with the proposed engagement letter with the Firm and the proposed agreed-upon procedures, to the CFPB Regional Director for non-objection.

51.

The engagement letter between the Bank and the Firm shall grant the CFPB access to the Firm's staff, work-papers, and matelials prepared in the course ofthe Fi1m's engagement and preparation of the reports required by the Restitution Order. 52.

To be acceptable to the CFPB Regional Director, the Firm must be an objective and unaffiliated third party and, at a minimum, comply with the Code of Conduct of the appropriate State Board of Accountancy.

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53.

Within 15 days after submission of the Firm's name, the CFPB Regional Director shall notify the Bank in writing of the CFPB's objection or non-objection thereto. 54.

The Finn shall submit the reports called for in paragraphs 55 to 61 to the CFPB Regional Director for review, comment, and non-objection within 30 days after the Bank completed implementation of each restitution plan. Report on Unreported Debt Restitution 55.

The Firm shall review and verify that the Bank accurately identified the Unreported Debt Eligible Consumers and correctly made cash refunds to the appropriate Unreported Debt Eligible Consumers.

56.

The Firm shall prepare a detailed written report of its assessment of the Bank's compliance with the Unreported Debt Restitution Plan ("Unreported Debt Restitution Report"). The Unreported Debt Restitution Repott shall also include the following: (i) The processes and procedures by which the Bank determined the restitution amounts described in paragraph 32;

(ii) The total number of Unreported Debt Eligible Consumers; and (iii) The total amount of restitution made under the Unreported Debt Restitution Plan.

Report on Debt Forgiveness Restitution 57.

The Firm shall review and verify that the Bank accurately identified the Debt Forgiveness Eligible Consumers and correctly made cash refunds to the appropriate Debt Forgiveness Eligible Consumers.

58.

The Firm shall prepare a detailed written report of its assessment of the Bank's compliance with the Debt Forgiveness Restitution Plan ("Debt Forgiveness Restitution Report"). Page 24 of28

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59.

The Debt Forgiveness Restitution Report shall also include the following: (i) The processes and procedures by which the Bank detennined the restitution amounts described in paragraph 38; (ii) The total number of Debt Forgiveness Eligible Consumers; and (iii) The total amount of restitution made under the Debt Forgiveness Restitution Plan.

Report on Hybrid Card Late Fees Restitution 60.

The Firm shall review and verify that the Bank accurately identified the Hybrid Card Late Fees Eligible Consumers and correctly made cash refunds to the appropriate Hybrid Card Late Fees Eligible Consumers.

61.

The Firm shall prepare a detailed written report of its assessment ofthe Bank's compliance with the Hybrid Card late Fees Restitution Plan ("Hybrid Card Late Fees Restitution Repmt"). The Hybrid Card Late Fees Restitution Report shall also include the following: (i) The processes and procedures by which the Bank determined the restitution amounts described in paragraph 42; (ii) The total number of Hybrid Card Late Fees Eligible Consumers; (iii) The total amount of restitution made under the Hybrid Card Late Fees Restitution Plan; and (iv) The total amount of interest paid.

IV.

ORDER TO PAY CIVIL MONEY PENALTY 62.

IT IS FURTHER ORDERED that by reason of the alleged violations of law and/or regulations as set forth in the Findings of Fact, and after taking into account the Stipulation, the appropriateness of the penalty with respect to the financial resources and good Page 25 of28

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faith of the Bank, the gravity of the conduct by the Bank, the severity of the risks to and losses of consumers, the history of previous conduct by the Bank, and such other matters as justice may require, pursuant to section 1055(c) ofthe CFP Act, 12 U.S.C. § 5565(c): The Bank shall pay a total civil money penalty of$1,200,000 to the CFPB in accordance with section 1017(d) of the CFP Act, 12 U.S.C. §5497(d), as directed by the CFPB. The Bank shall pay such civil money penalty itself and is prohibited from seeking or accepting indemnification from such payment from any third party.

V.

NOTIFICATION AND REPORTING REQUIREMENTS PROGRESS REPORTS AND CERTIFICATIONS OF COMPLIANCE 63.

Within 30 days from the end of each calendar quarter following the Effective Date, the Bank shall provide a written progress report addressing each provision of the Orders and detailing the fotm, manner, results and dates of any actions taken to secure compliance with the provisions of the Orders to the CFPB Regional Director. All progress reports and other written responses to the Orders shall be reviewed by the Board and made a part of the Board minutes. The progress reports shall be true and accurate and accompanied by a cettification of compliance signed by the Chairman of the Board and the Bank President. The certification of compliance shall include the following:

(a) A statement confirming that the Bank is in compliance with all provisions of the Orders; or (b) If the Bank is not in compliance with all provisions of the Orders, the Bank must provide:

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(i) A list of the provisions with which the Bank is not yet in compliance, an explanation of why the Bank is not yet in compliance with each specific provision, and a description of the actions the Bank has taken to comply with the provision; and (ii) A statement as to when the Bank will be in full compliance with the Joint Orders.

SHAREHOLDERS 64.

The Bank shall either provide a copy of the Orders to its shareholder AETRS or otherwise furnish a description of the Order in conjunction with the next board of directors meeting of AETRS, in which case such description shall fully describe the Orders in all material respects. The description and any accompanying communication, statement, or notice shall be sent to the CFPB, Office of Enforcement, 1700 G Street, N.W., Washington, D.C. 20552, for non-objection or comment prior to dissemination to shareholders. Any changes requested to be made by the CFPB shall be made prior to dissemination of the description, communication, notice, or statement. This description shall be disseminated in conjunction with the Bank's next shareholder communication and in conjunction with its notice or proxy statement preceding the Bank's next shareholder meeting. The terms "next shareholder communication" and "next shareholder meeting" mean the next shareholder communication and next shareholder meeting immediately after the CFPB provide the Bank with either non-objection of or comments about the description.

VI.

SAVINGS CLAUSE AND EFFECTIVE DATE OF THE ORDERS The provisions of the Orders shall not bar, estop or otherwise prevent the CFPB or any other federal or state agency or department from taking any other action against the Bank. The Orders shall be effective on the date of issuance.

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Calculation of time limitations for compliance with the terms of the Orders shall be based on calendar days, unless otherwise noted.

The provisions of the Orders shall be binding on the Bank, its officers, ~gents, servants, employees, other institution-affiliated parties, and any successors and assigns thereof. The provisions of the Orders shall remain effective and enforceable except to the extent that and until such time as any provision has been modified, terminated, suspended, or set aside by the CFPB.

Any violation of the Orders may result in the imposition by the CFPB of the maximum amount of civil money penalties allowed under section 1055(c) ofthe CFP Act, 12 U.S.C. §5565(c).

The provisions of the Orders shall be enforceable by the CFPB. Issued this / 51"' day of Qv/ok '2012.

Director Consumer Financial Protection Bureau Page 28 of28

Stipulation

PDF of this document (3 pages)

Page 30

UNITED STATES OF AMERICA Before the CONSUMER FINANCIAL PROTECTION BUREAU

ADMINISTRATIVE PROCEEDING File No. 2012-CFPB-0003

)

) In the Matter of:

) CONSENT ORDER,

) ORDER FOR AMERICAN EXPRESS BANK, FSB ) RESTITUTION, AND SALT LAKE CITY, UTAH ) ORDER TO PAY

) CIVIL MONEY PENALTY

)

)

)

)

)

Subject to the acceptance of this Stipulation And Consent To The Issuance Of A Consent Order, Order For Restitution, and Order To Pay Civil Money Penalty (“Stipulation”) by the Consumer Financial Protection Bureau (“CFPB”), it is hereby stipulated and agreed by and between a representative of the Office of Enforcement of the CFPB and American Express Bank, FSB, Salt Lake City, Utah (“Bank”) as follows:

1.

The Bank admits that it is a “covered person” as that term is defined in section 1002(6)(A) of the Consumer Financial Protection Act (“CFP Act”), 12 U.S.C. § 5481(6)(A).

2.

The Bank admits that the CFPB has jurisdiction over the Bank pursuant to section 1002(6), 1025 and 1053(b) of the CFP Act, 12 U.S.C §§ 5481(6), 5515 and 5563(b). 3.

The CFPB has reason to believe that the Bank has engaged in violation of various federal consumer financial laws and regulations, including Sections 1031 and 1036 of the CFP Act, 12 U.S.C. §§ 5531 and 5536; the Truth in Lending Act, as amended by the Credit CARD Act of 2009, 15 U.S.C. §§ 1601 et seq., and section 1026.52(b)(1) of Regulation Z,

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12 C.F.R. § 1026.52(b)(1); the Fair Credit Reporting Act, 15 U.S.C. §§ 1681 et seq., 12 C.F.R. Part 1022.1 4.

The Bank, solely for the purpose of this proceeding and without admitting or denying any of the findings of fact, and any violations of law, hereby consents and agrees to the issuance of the Orders by the CFPB.

5.

The Bank further consents and agrees to pay a civil money penalty in the amount of $1,200,000 to the CFPB pursuant to section 1017(d) of the CFP Act, 12 U.S.C. § 5497(d). 6.

The Bank further stipulates and agrees that such Orders will be deemed to be orders which have become final under the CFP Act, and that said Orders shall become effective upon their issuance by the CFPB, and fully enforceable by the CFPB pursuant to the provisions of the CFP Act.

7.

The Bank hereby waives its right under the CFP Act to: (a) All hearings pursuant to the statutory provisions under which the proceeding has been instituted;

(b) The filing of Proposed Findings of Fact and Conclusions of Law; (c) Proceedings before, and a recommended decision by, a hearing officer; (d) All post-hearing procedures;

(e) Judicial review by any court; and (f) Any objection to the jurisdiction of the CFPB under section 1053 of the Dodd-Frank Act.

1 Effective December 30, 2011, the Consumer Financial Protection Bureau republished some of the existing regulations implementing federal consumer financial laws, including Regulation Z, in Chapter X of Title 12 of the Code of Federal Regulations. All citations to this regulation will refer to the republished regulations for ease of reference.

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The Bank further waives (i) such provisions of the CFPB’s rules or other requirements of law as may be construed to prevent any CFPB employee from participating in the preparation of, or advising the CFPB Director as to, any order, opinion, finding of fact, or conclusion of law to be entered pursuant to the offer; and (ii) any right to claim bias or prejudgment by the CFPB Director based on the consideration of or discussions concerning settlement of all or any part of the proceeding.

Dated this 27th day of September, 2012.

CONSUMER FINANCIAL PROTECTION BUREAU

BY:

/Erin Mary Kelly/

Erin Mary Kelly, Enforcement Attorney Greg Nodler, Enforcement Attorney Christina Coll, Enforcement Attorney

AMERICAN EXPRESS BANK, FSB SALT LAKE CITY, UTAH

/Tom Anderson/

/Jay Stevelman/

Tom Anderson

Jay Stevelman

/Scott Godderidge/

/Roslyn Watson/

Scott Godderidge

Roslyn Watson

/Roger Goldman/

/Bob Phelan/

Roger Goldman

Bob Phelan

/Peter Lefferts/

/Peter Sisti/

Peter Lefferts

Peter Sisti

Comprising the Board of Directors of American Express Bank, FSB Salt Lake City, Utah

Document (Aug. 2017)

PDF of this document (1 pages)

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2012-CFPB-0003 Document3 _ Filed 08/03/2017 Page 1 of 1

UNITED STATES OF AMERICA CONSUMER FINANCIAL PROTECTION BUREAU

ADMINISTRATIVE PROCEEDING File No. 2012-CFPB-0003

ORDER TERMINATING THE In the Matter of: CONSENT ORDER American Express Bank, FSB

With the consent of American Express Bank, FSB (the Bank), by and through its Board of Directors, the Consumer Financial Protection Bureau (Bureau) issued a Consent Order on October 1, 2012, for violations of various Federal consumer financial laws and regulations, including Sections 1031 and 1036 of the Consumer Financial Protection Act, 12 U.S.C. §§ 5531 and 5536; the Truth in Lending Act, as amended by the Credit CARD Act of 2009, 15 U.S.C. §§ 1601 et seq.; and the Fair Credit Reporting Act, 15 U.S.C. §§ 1681 et seq.

To this date, the Bank has fulfilled its obligations under the Consent Order, including, among other things, depositing no less than $10 million into a segregated account to provide redress to affected consumers, and paying a civil money penalty of $1.2 million. Accordingly,

under Section VI of the Consent Order, the Bureau directs that the Consent Order be, and it

hereby is, terminated this 2d day of Aragpaat 2017.

Richard Cordray 4

Director Consumer Financial Protection Bureau