American Express pays $96 million to settle pricing discrimination case

American Express is paying $96 million to credit card customers in Puerto Rico and other U.S. territories for charging higher interest rates and engaging in other discriminatory practices, federal regulators said on Wednesday. The U.S. Consumer Financial Protection Bureau announced that more than 200,000 consumers at two of the company’s banking subsidiaries had been harmed by the practices, which also included stricter credit cutoffs and less debt forgiveness than offered to customers in U.S. states.The CFPB ordered the company to pay an additional $1 million on top of the $95 million and establish new guidelines to ensure the terms of its card offerings were not discriminatory in the future.

 Over the least ten years, more than 200,000 consumers were harmed by the discriminatory practices, which included charging higher interest rates, imposing stricter credit cutoffs, and providing less debt forgiveness. American Express has paid approximately $95 million in consumer redress during the course of the Bureau’s review and American Express’ review, and today’s order requires it to pay at least another $1 million to fully compensate harmed consumers.

The American Express Company is a multi-bank holding corporation based in New York and a global provider of credit and charge cards, savings accounts, certificates of deposit, and travel services. American Express Centurion Bank and American Express Bank, FSB are both bank subsidiaries of American Express Company that administer American Express Company’s credit and charge card lines of business. These companies offered 45 credit cards and charge cards, which are similar to credit cards but require the full balance to be paid monthly, in its U.S. states market, including cards such as the American Express Green, Gold, and Platinum. In addition to managing cards offered in the 50 U.S. states, these two companies also manage cards offered in Puerto Rico, the U.S. Virgin Islands, and other U.S. territories, which include Guam, American Samoa, and Northern Mariana Islands.

 In 2013 American Express self-reported to the Bureau differences between its Puerto Rico and U.S. Virgin Islands cards (collectively, Puerto Rico cards) and its cards offered in the 50 U.S. states (U.S. cards), as well as differences with respect to certain consumers with a Spanish-language preference. Through the course of a supervisory review, the Bureau concluded that, from at least 2005 to 2015, American Express’ Puerto Rico cards had different—and often worse—pricing, rebates, and promotional offers, underwriting, customer and account management services, and collections practices than its U.S. cards. The Bureau’s review did not find that American Express intentionally discriminated against its customers but rather found that these differences were the result of American Express’ card management structure, which had different business units overseeing its Puerto Rico cards and U.S. cards. These differences spanned the product lifecycle and included:

  • Charging higher fees and interest rates and offering less advantageous promotional offers;
  • Imposing more stringent credit score cutoffs and lower credit limits;
  • Requiring more money to settle debt.

Enforcement Action
The Dodd-Frank Wall Street Reform and Consumer Protection Act authorizes the CFPB to take action against creditors engaging in discrimination in violation of the Equal Credit Opportunity Act (ECOA). ECOA prohibits creditors from discriminating against applicants and prospective applicants in credit transactions on the basis of characteristics such as race and national origin. Under the terms of the CFPB order released today, American Express is required to:

  • Fully remediate harmed consumers: During the Bureau’s review, American Express provided monetary and non-monetary relief to 221,932 harmed consumers, resulting in approximately $95 million of remediation. American Express must review and verify the adequacy of any redress done prior to the CFPB order. The Bureau is ordering American Express to pay at least an additional $1 million to redress harmed consumers who have not yet been fully compensated, as required by the consent order.
  • Not discriminate against residents of Puerto Rico, the U.S. territories, and consumers with a Spanish-language preference: American Express must develop and implement a comprehensive compliance plan to ensure that it provides credit and charge cards in a non-discriminatory manner to consumers in Puerto Rico, the U.S. territories, and customers in collection who prefer Spanish-language communications. American Express has already modified its management structure such that it manages its Puerto Rico cards under the same division as its U.S. cards. The compliance plan must include any necessary additional improvements to its compliance management system; compliance audit program; credit and charge card business structure, policies, and procedures; employee training procedures; and complaints procedures.

Jeffrey Newman represents whistleblowers.