CFPB: American Express discriminated in Puerto Rico, territories
Credit card issuer paying $96 million in compensation for charging higher rates, other practices
Expert on consumer credit laws and regulations.
More than 200,000 American Express credit card customers are receiving $96 million in compensation because of discrimination that drove up fees, interest and other costs, mostly for customers in Puerto Rico, the U.S. Virgin Islands and the Pacific Territories, the U.S. Consumer Financial Protection Bureau announced.
Some Spanish-speaking credit card customers in collections were also harmed because they did not receive settlement terms as advantageous as other, non-Spanish-speaking customers from May 2012 to May 2014, the consumer bureau said.
“Consumer financial protections are not confined within the 50 states,” CFPB Director Richard Cordray said in a statement. “American Express discriminated against consumers in Puerto Rico and the U.S. territories by providing them with less-favorable financial products and services.”
American Express in a news release disputed the CFPB’s conclusion that the differences in its cards in U.S. territories amounted to discrimination.
“The company is committed to making its products available to every qualified person regardless of race or ethnic background, and it does not use race or ethnicity as a determining factor for credit,” the statement said. Card terms for the affected customers were competitive with others in the local market, the company said, while acknowledging that, by law, the card terms should not have varied from their counterparts available in the states.
Card fees varied by geographical location
For example, the company’s PRVI Platinum Card in Puerto Rico and the U.S. Virgin Islands had a $45 annual fee, while the comparable card in the states had no fee, according to the order. Interest rates were also higher for the PRVI card, and credit limits were tighter than those for customers in the states.
Cordray went on to say that the credit card company brought the problems to the bureau’s attention. The disparate practices resulted from having a separate management structure for the affected markets, not because of an intention to discriminate, the CFPB said. As a result, the bureau’s consent order does not include a fine against the company.
“They have ceased this practice and are making consumers whole,” Cordray said.
Under the Equal Credit Opportunity Act, lenders are barred from discriminating on the basis of race, sex, national origin or other protected status. Geographic differences in policies – such as excluding certain neighborhoods from mortgage loans – can amount to discrimination against protected groups under the law.
Refunds to customers already under way
After Puerto Rico issued anti-discrimination regulations for U.S. business in 2011, AmEx began to review differences in its business practices there, according to its consent order with the CFPB. In 2013, it told the agency about the different business practices and began making refunds to affected customers
About 222,000 affected credit card customers have received $95 million in refunds, with about $1 million remaining to be paid, the CFPB said. The discrimination was identified from 2005 up until 2015, according to the consent order.
Further refunds will be paid by check to ex-customers and as a statement credit to those with an open account, under the consent order. For customers with delinquent balances, the amount due will be reduced by the amount of the refund. The CFPB will monitor AmEx’s compliance with the repayment plan.
The Pacific Territories include Guam, American Samoa and Northern Mariana Islands.
In 2014, the consumer bureau ordered credit card issuer GE Capital, now called Synchrony, to pay $225 million for discrimination against customers in Puerto Rico and those who received company communications in Spanish.
- Credit freezes are now free – but do you need one? – Credit freezes, which keep lenders and other companies from viewing your credit, are now free. We compared them to other credit protection tools, including locks and monitoring services. Here's how to use them all to protect yourself ...
- Employer credit checks: Who does them, how they work and what laws apply – If you're applying for a new job, a credit check could determine your fate, depending on the position and where it's based. Here's how they work and what to expect ...
- My card issuer of 25 years suddenly wants to know more about me – Under the Patriot Act, banks are required to verify the identities of their customers and maintain accurate information on them. But my bank's demand to know how I earn my income is an invasion of my privacy ...