Regulators ordered American Express to pay back customers for deceptive marketing and unfair billing of ID theft and identity protection products
American Express will refund $59.5 million to credit card customers who signed up for add-ons — mainly payment protection and identity theft protection products — that promised more than they delivered, the Consumer Financial Protection Bureau announced Tuesday.The refund will be divided among more than 335,000 consumers who were affected by deceptive marketing or unfair billing, the agency said, for an average of about $177 per person.
The card giant’s units will also pay a total of $16.2 million in fines and penalties to the CFPB and two bank regulatory agencies that joined in the enforcement action.
Credits posted, checks in the mail
American Express said that it has already made most of the refunds called for in the settlement. Current customers who were due a refund received credits on their monthly statements that identified the product connected to the refund, said Marina Norville, AmEx vice president for public affairs and communications. Ex-customers are receiving their refunds via checks from the company, most of which have been sent, she said.
The consumer protection bureau said its examination found that misleading telemarketing of card add-ons by AmEx units and their vendors began in 2000 and continued through 2012.
“We first warned companies last year about using deceptive marketing to sell credit card add-on products, and everyone should be on notice of this issue,” CFPB Director Richard Cordray said in the bureau’s announcement.
The agency has previously penalized Capital One, Discover and Chase Bank for deceptive marketing of credit card add-on products, mandating refunds totaling $649 million. In addition, Bank of America has said it ceased marketing ID theft and payment protection plans and refunded an undisclosed amount of fees to some customers. American Express agreed to refund $85 million to card customers in 2012 for marketing and debt collection practices that did not involve add-ons.
We first warned companies last year about using deceptive marketing to sell credit card add-on products, and everyone should be on notice of this issue.
|— Richard Cordray|
The AmEx products involved in the settlement included “Account Protector” which covered partial monthly payments in the event of unemployment or temporary disability; “Identity Protector,” a credit monitoring service, and “Lost Wallet Puerto Rico,” limited to marketing of a card replacement service in Puerto Rico.
Some buyers of Account Protector were told that their minimum monthly payment would be taken care of if they experienced certain qualifying events, but the benefit payment was limited to 2.5 percent of their monthly balance, up to $500. “In many cases, that amount was less than the monthly payment due,” the CFPB said. Consumers also understood that the length of protection period was up to 24 months, but only two of the 13 life events triggering the benefit had a protection period that long; most events were covered for only one, two or three months, according to the CFPB.
With the Identity Protector product, buyers were charged fees as soon as they enrolled, although AmEx had not yet received authorization to monitor their credit. About 85 percent of enrollees did not receive all the benefits they were promised. “In some cases, consumers paid for these services for several years without receiving all the promised benefits,” the CFPB said. The fees for the services also sometimes triggered interest charges and added over-limit fees to consumers’ balances.
“Lost Wallet” protection marketed in Puerto Rico in Spanish sales scripts did not inform buyers about the steps they needed to take in order to benefit from the card cancellation and replacement service, the CFPB said.
Norville said the card company has worked with regulators to identify and root out problem marketing and billing practices. It announced a review of the practices in October 2012.
“Regulators want us to be clear, transparent and fair to our customers, and that is our goal as well,” Norville said. The company halted marketing of the ID theft and payment protection products to new customers last year, and expects during the first quarter of 2014 to complete winding down the products for existing customers who are enrolled in them.