American Express Travel Related Services Company, Inc.
Documents in this case
- Consent order · 8 p.
- Stipulation · 3 p.
- Document · · 3 p.
- Document · · 1 p.
Case summary
American Express Travel Related Services
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 (8 pages)
Page 2
UNITED STATES OF AMERICA Before the CONSUMER FINANCIAL PROTECTION BUREAU ADMINISTRATIVE PROCEEDING File No. 2012-CFPB-0004 In the Matter of:
AMERICAN EXPRESS TRAVEL RELATED SERVICES COMPANY, INC.
) ) ) ) ) ) ) ) ) ) ) ______________________________ ) CONSENT ORDER, ORDER FOR RESTITUTION, AND ORDER TO PAY CIVIL MONEY PENALTY The Consumer Financial Protection Bureau ("CFPB") has jurisdiction over American Express Travel Related Services Company, Inc. ("AETRS") pursuant to sections 1002(6), 1002(26), 1025, and 1053(b) ofthe Consumer Financial Protection Act ("CFP Act"), 12 U.S.C. §§ 5481(6), 5481(26), 5515, and 5563(b).
I.
OVERVIEW The CFPB finds that AETRS has engaged in violations of sections 1031 and 1036 of the CFP Act, 12 U.S.C. §§ 5531 and 5536, for deceptive debt collection practices, and, as a service provider to its subsidiary banks, American Express Centurion Bank ("AECB") and American Express Bank, FSB ("AEBFSB") for deceptive debt collection and marketing practices.
Page 3
FINDINGS OF FACT Based on the joint FDIC/Utah Department of Financial Institutions Compliance Report of Examination issued to AECB ("ROE") dated February 22, 2012, with which the CFPB concurred, the CFPB's Supervisory Letter issued to AEBFSB ("Supervisory Letter") dated June 14, 2012, and information collected through the examination of AECB and targeted review of AEBFSB which formed the basis for the ROE and Supervisory Letter, the CFPB fmds the following facts and makes the following conclusions of law: AETRS Card Portfolio- Deceptive Debt Collection Practices (1) AETRS has issued charge and/or credit cards to consumers and continues to service and manage the accounts associated with these cards, including accounts for which debt has been charged off.
(2) 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 AETRS to consumer reporting agencies. AETRS 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 AETRS failed to prominently disclose that the consumer must pay the full debt balance before AETRS would process any future credit or charge card application. (3) These debt collection practices have been described in the Joint Consent Order issued by the CFPB and FDIC to AECB, No. 2012-CFPB-0002 ("AECB Joint Consent Order"), and the Consent Order issued by the CFPB to AEBFSB, No. 2012-CFPB-0003 ("AEBFSB Page 2 of8
Page 4
Consent Order"). The CFPB found that AECB and AEBFSB's debt collection practices violated sections 1031 and 1036 of the CFP Act in the AECB Joint Consent Order and AEBFSB Consent Order.
(4) By engaging in similar practices with respect to its own card portfolio, AETRS violated sections l 031 and l 036 of the CFP Act.
AETRS as Service Provider to American Express Banking Subsidiaries AECB and AEBFSB (5) AETRS acted as a service provider to American Express banking subsidiaries AECB and AEBFSB.
( 6) AETRS marketed, processed, and serviced the card portfolios at AECB and AEBFSB. AETRS also provided compliance, audit, and information technology support to AECB and AEBFSB.
(7) AETRS developed, managed, and administered marketing and promotional programs, including a 2010 marketing campaign regarding a Blue Sky Credit Card at AECB. In the AECB Joint Consent Order the CFPB found the 2010 marketing campaign regarding AECB 's Blue Sky Credit Card to be in violation of sections 1031 and 1 036 of the CFP Act. (8) Since at least 2003, AETRS developed, managed, and administered internal and third party debt collection practices on its own behalf and on behalf of AECB and AEBFSB. The CFPB found certain debt collection practices to be in violation of sections 1031 and 1036 of the CFP Act in the AECB Joint Consent Order and AEBFSB Consent Order. (9) As a service provider with respect to the deceptive debt collection and deceptive marketing practices described in the AECB Joint Consent Order and in the deceptive debt Page 3 of8
Page 5
collection practices described in the AEBFSB Consent Order, AETRS violated sections I 031 and 1036 ofthe CFP Act.
STIPULATION AETRS, 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, AETRS has consented, without admitting or denying any findings of fact or 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) ofthe CFP Act, 12 U.S.C. § 5553(b), have been satisfied, the CFPB, therefore, accepts the Stipulation and issues the following Orders:
II.
CONSENT ORDER CORRECTIONS OF VIOLATIONS OF LAWS IT IS HEREBY ORDERED that AETRS and its officers, agents, servants and employees immediately cease and desist from engaging in violations of the CFP Act and it is further ordered that AETRS take affirmative actions as of the date of issuance of the Order ("Effective Date"), unless otherwise specified, as follows: 1.
AETRS shall correct all violations of law, as described above, and shall implement procedures to prevent their recurrence. AETRS'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. Page 4 of8
Page 6
2.
AETRS shall not take any actions which interfere with AECB or AEBFSB taking all action necessary to comply with the AECB Joint Consent Order and AEBFSB Consent Order. 3.
AETRS shall take all action necessary to eliminate its violations of Sections 1031 and 1036 and shall take appropriate steps to effect and maintain future compliance with Sections 1031 and 1036 as described more particularly herein.
4.
When collecting debt on its own behalf, AETRS shall follow the Debt Collection Practices described in the AECB Joint Consent Order and AEBFSB Consent Order. III.
ORDER FOR RESTITUTION RESTITUTION PLAN FOR COLLECTION OF UNREPORTED DEBT AND DEBT FORGIVENESS SOLICITATIONS 5.
Within 30 days from the Effective Date, AETRS shall prepare a comprehensive Restitution Plan for Deceptive Debt Collection Activities ("Restitution Plan") for consumers affected by its deceptive debt collection practices. The plan shall include the applicable requirements of the Restitution Plans for Collection of Unreported Debt and the Restitution Plans for Debt Forgiveness Solicitations as described in AECB Joint Consent Order and AEBFSB Consent Order. AETRS shall submit the Restitution Plan to the CFPB Regional Director for review, comment, and non-objection prior to implementation. MAILING REFUNDS 6.
Within 30 days from the effective date of the Order for Restitution, AETRS 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. The plan for mailing refunds shall be consistent with the applicable provisions Page 5 of8
Page 7
of the Mailing Refunds requirements described in the AECB Joint Consent Order and AEBFSB Consent Order.
INDEPENDENT CERTIFIED ACCOUNTING FIRM 7.
Within 45 days from the Effective Date, AETRS shall retain, at its expense, an independent certified accounting firm ("Firm") acceptable to the CFPB Regional Director to determine compliance with the Restitution Plan and consistent with the applicable Independent Certified Accounting Firm requirements described in the AECB Joint Consent Order and AEBFSB Consent Order. The Firm shall submit the report regarding the Restitution Plan as required by this order to the CFPB Regional Director. The report regarding the Restitution Plan shall be consistent with the applicable requirements of the Reports on Unreported Debt Restitution and Reports on Debt Forgiveness Restitution described in the AECB Joint Consent Order and AEBFSB Consent Order.
IV.
ORDER TO PAY CIVIL MONEY PENALTY 8.
IT IS FURTHER ORDERED that by reason of the alleged violations of law and other activity as set forth in the Agency Findings of Fact, and after taking into account the Stipulation, the appropriateness of the penalty with respect to the financial resources and good faith of AETRS, the gravity of the conduct by AETRS, the severity of the risks to and losses of consumers, the history of previous conduct by AETRS, and such other matters as justice may require, pursuant to section 1055(c) of the CFP Act, 12 U.S.C. § 5565(c): AETRS shall pay a total civil money penalty of$9,000,000 in accordance with section 1017(d) of the CFP Act, 12 U.S. C. § 5497(d). AETRS shall pay such civil money penalty itself and is prohibited from seeking or accepting indemnification from such payment from any third party. Page 6 of8
Page 8
V.
NOTIFICATION AND REPORTING REQUIREMENTS PROGRESS REPORTS AND CERTIFICATIONS OF COMPLIANCE 9.
Within 30 days from the end of each calendar quarter following the Effective Date, AETRS shall provide written progress reports addressing each provision of the Orders and detailing the form, 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 of Directors of AETRS ("Board") and made a patt of the Board minutes. The progress reports shall be true and accurate and accompanied by a certification of compliance by the Chairman of the Board of AETRS and the AETRS President. The certification of compliance shall include the following: (a) A statement confirming that AETRS is in compliance with all provisions of the Orders; or (b) If AETRS is not in compliance with all provisions of the Orders, AETRS must provide:
(i) A list of the provisions with which AETRS is not yet in compliance, an explanation of why AETRS is not yet in compliance with each specific provision, and a description of the actions AETRS has taken to comply with the provision; and (ii) A statement describing when AETRS will be in full compliance with the Orders.
VI.
SAVINGS CLAUSE AND EFFECTIVE DATE OF THE ORDERS 10.
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 AETRS. 11.
The Orders shall be effective on the date of issuance. Page 7 of8
Page 9
12.
Calculation of time limitations for compliance with the terms of the Orders shall be based on calendar days, unless otherwise noted. 13.
The provisions of the Orders shall be binding on AETRS and their officers, agents, servants, employees, and any successors and assigns thereof. 14.
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.
15.
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).
Issued this 1 f'(' day of D + {yv...
' 2012.
Director Consumer Financial Protection Bureau Page 8 of8
Stipulation
PDF of this document (3 pages)
Page 10
UNITED STATES OF AMERICA Before the CONSUMER FINANCIAL PROTECTION BUREAU
ADMINISTRATIVE PROCEEDING File No. 2012-CFPB-0004
)
) In the Matter of:
) STIPULATION TO ISSUANCE OF
) A CONSENT ORDER, ORDER AMERICAN EXPRESS TRAVEL ) FOR RESTITUTION, AND RELATED SERVICES COMPANY, INC.
) ORDER TO PAY CIVIL
) MONEY PENALTY
)
)
)
)
Subject to the acceptance of this Stipulation, it is hereby stipulated and agreed by and between a representative of the Office of Enforcement of the CFPB and American Express Travel Related Services Company, Inc. (“AETRS”) as follows: 1.
AETRS admits that it is a “covered person,” and a “service provider” as those terms are defined in sections 1002(6) and 1002(26) of the Consumer Financial Protection Act (“CFP Act”), 12 U.S.C. §§ 5481(1), 5481(6), and 5481(26). 2.
AETRS admits that the CFPB has jurisdiction over AETRS pursuant to sections 1002(6), 1002(26), 1025, and 1053(b) of the CFP Act, 12 U.S.C. §§ 5481(6), 5481(26), 5515 and 5563(b).
3.
The CFPB has reason to believe that AETRS has engaged in violation of sections 1031 and 1036 of the CFP Act, 12 U.S.C. §§ 5531 and 5536. 4.
AETRS, 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
Page 11
issuance of the Consent Order, Order for Restitution, and Order to Pay Civil Money Penalty by the CFPB (“Orders”).
5.
AETRS further consents and agrees to pay a civil money penalty in the amount of $9,000,000 to the CFPB pursuant to section 1017(d) of the CFP Act, 12 U.S.C. § 5497(d). 6.
AETRS 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.
AETRS 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.
8.
AETRS 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
Page 12
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 TRAVEL RELATED SERVICES COMPANY, INC. NEW YORK, NEW YORK
/Kenneth Chenault/
Kenneth Chenault
/Louise M. Parent/
Louise M. Parent
/David L. Yowan/
David L. Yowan
Comprising the Board of Directors of American Express Travel Related Services Company, Inc. New York, New York
Document ()
PDF of this document (3 pages)
Page 13
ENDING ILLEGAL CREDIT CARD PRACTICES The Consumer Financial Protection Bureau (CFPB) announced a public enforcement action with orders requiring American Express to refund an estimated $85 million to approximately 250,000 customers. At every stage of the consumer experience, from marketing to enrollment to payment to debt collection, several American Express bank programs violated consumer protection laws.
By the Numbers • $85 million: The estimated total refund to American Express consumers. • 250,000: The approximate number of consumers receiving a refund. • $27.5 million: The civil monetary penalty that American Express will be fined by the CFPB, the Federal Deposit Insurance Corporation (FDIC), the Board of Governors of the Federal Reserve System (Federal Reserve Board), and the Office of the Comptroller of the Currency. Overview The investigation of American Express Centurion Bank, a state-chartered industrial bank and subsidiary to the American Express Company, began in February 2011 with a routine exam by the FDIC and the Utah Department of Financial Institutions. The FDIC shared the case with the CFPB after the CFPB inherited jurisdiction over consumer financial laws in July 2011.
CFPB examiners later confirmed multiple violations across two other American Express subsidiaries: American Express Bank, FSB, a federal savings association; and American Express Travel Related Services Company, Inc., a bank holding company and parent company to American Savings Bank, FSB and American Express Centurion Bank. The investigations found that the violations occurred at various points in time between 2003 and spring 2012.
Through a cooperative effort, several federal agencies that have jurisdiction over the American Express entities got involved in the investigations and found wrongdoing. Those federal government agencies, in addition to the CFPB and FDIC, are the Office of the Comptroller of the Currency and the Federal Reserve Board. The agencies have either joined the CFPB in its Consent Orders against American Express or issued their own Consent Order. The State of Utah has also taken its own action.
Deceptive Marketing Practices American Express Centurion Bank customers were sometimes misled to believe they would receive $300 in addition to bonus points if they signed up for the “Blue Sky” credit card. But consumers who met the qualifications did not receive $300. This is a violation of the Consumer Financial Protection Act which prohibits unfair, deceptive, or abusive acts or practices.
Age Discrimination American Express Centurion Bank used a credit scoring system that treated card applicants differently on the basis of age. For eight months, the bank did not fully implement the system for applicants over the age of 35. This violated the Equal Credit Opportunity Act because it requires credit scoring systems that take age into account to be properly designed and implemented.
Page 14
Unlawful Fees on Existing Accounts American Express Centurion Bank and American Express Bank, FSB billed late fees on certain charge cards based on a 2.99 percent portion of the customer’s delinquent balance in violation of the Truth in Lending Act, as amended by the Credit CARD Act.
Consumer Disputes American Express Centurion Bank and American Express Bank, FSB failed to report certain consumer disputes to consumer reporting agencies. This is a violation of the Fair Credit Reporting Act.
Deceptive Debt Collection All three of the American Express subsidiaries told certain consumers that settling old debt — debt that had been in collections or had already been charged off— would be reflected on their credit report and that payment could improve their credit score. But, in fact, the entities did not report such debt to the credit reporting agencies and the debt was so old that it may not have appeared on a credit report. The American Express subsidiaries also sent letters to consumers saying that after they paid off their old debt, the consumer’s remaining debt would be waived or forgiven. But for customers who applied for a new American Express card, the company was not really forgiving or waiving the debt. American Express failed to prominently disclose that the consumer had to have paid the full balance before the bank would process any future credit or charge card application. These actions by the subsidiaries violate the Consumer Financial Protection Act which prohibits unfair, deceptive, or abusive acts or practices.
CFPB Enforcement Action The Bureau has issued Consent Orders to the three American Express subsidiaries. To ensure that all affected consumers are repaid and that consumers are no longer subject to these misleading and unlawful deceptive acts and practices, American Express has agreed to:
• End illegal practices: American Express must stop deceiving consumers with Blue Sky credit card marketing or any other card marketing by falsely promising a rebate or points feature. American Express will not charge illegal late fees. It will not unlawfully discriminate based on age when it comes to credit decisions. It will properly report disputes to credit reporting agencies and will make sure that cardholders are told about their rights regarding credit disputes. And it will report consumer disputes when it is supposed to.
• American Express will exercise effective oversight and control over its service providers: The Board of Directors and senior management at American Express Centurion Bank and American Express Bank, FSB must review, revise, develop and implement a sound risk-based compliance management system.
• Complete repayment plus interest to approximately 250,000 consumers: American Express will pay an estimated $85 million to approximately 250,000 consumers who were illegally charged, or who had money illegally collected or withheld. Specifically, consumers who responded to deceptive marketing and paid off old debt in full will be reimbursed. Consumers whose debt was not forgiven as promised will receive $100 and a pre-approved offer for a new card with terms acceptable to the CFPB and FDIC. Any of these consumers who previously paid the waived or forgiven amount in order to get a new card will be refunded that amount plus interest. Blue Sky customers who were promised $300 for signing up will get their $300. Consumers who paid an illegal late fee will be reimbursed, with interest. American Express will also be required to certify that all qualified consumers who suffered unlawful age discrimination have an opportunity to reapply for a card.
• Convenient repayment for consumers: American Express customers can expect to receive their payouts no later than March 15, 2013. American Express will contact the current and former cardholders directly. If the consumers are still American Express customers, they will see a credit in their account. If they no longer
Page 15
have a credit or charge card account or outstanding balance with American Express, they will receive a check in the mail.
• Independent audit: Compliance with the terms of the Consent Order will be assured through the work of an independent auditor.
• $27.5 million civil monetary penalty: The three American Express subsidiaries will be fined $14.1 million in total civil monetary penalties by the CFPB, which has jurisdiction over all three subsidiaries. American Express Centurion Bank will be fined $3.9 million by the FDIC. American Express will be fined $9 million by the Federal Reserve Board, which has jurisdiction over American Express Travel Related Services Company, Inc. and American Express Company, the parent company of all three American Express subsidiaries. And American Express Bank, FSB will be fined $500,000 by the Office of the Comptroller of the Currency.
Document ()
PDF of this document (1 pages)
Page 16
2012-CFPB-0004 Document3 _ Filed 08/03/2017 Page 1 of 1
UNITED STATES OF AMERICA CONSUMER FINANCIAL PROTECTION BUREAU
ADMINISTRATIVE PROCEEDING File No. 2012-CFPB-0004
ORDER TERMINATING THE In the Matter of: CONSENT ORDER
American Express Travel Related Services Company, Inc.
With the consent of American Express Travel Related Services Company, Inc. (“AETRS”), by and through its Board of Directors, the Consumer Financial Protection Bureau (Bureau) issued a Consent Order on October 1, 2012, for violations of Sections 1031 and 1036 of the Consumer Financial Protection Act of 2010, 12 U.S.C. §§ 5531 and 5536,
To this date, AETRS has fulfilled its obligations under the Consent Order, including, among other things, providing appropriate redress to affected consumers, and paying a civil money penalty of $9 million.
Accordingly, under Paragraph 14 of the Consent Order, the Bureau directs that the Consent
Order be, and it hereby is, terminated this 7 day of Sukpuct. 2017.
Richard Cordray Director
Consumer Financial Protection Bureau