Thu, Dec 26, 2013 - Page 15 News List

American Express to pay US$75.7m settlement for misleading customers

AFP, NEW YORK

Credit-card giant American Express (AmEx) on Tuesday announced a US$75.7 million settlement to resolve charges that it overbilled consumers and misled customers on services provided.

AmEx, a Dow component, is to pay US$16.2 million in fines and at least US$59.5 million in customer remediation, the company said.

The customer remediation is to go to more than 335,000 customers, the US Consumer Financial Protection Bureau (CFPB) said in a statement.

The action also involved the US Federal Deposit Insurance Corp (FDIC) and the US Office of the Comptroller of the Currency (OCC).

“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. “Consumers deserve to be treated fairly and should not pay for services they do not receive.”

The settlement resolves a variety of allegations over AmEx’s management of various supplementary products to customers, such as “identity protection.”

In some cases, AmEx charged consumers for identity protection services without the written authorization necessary to provide services, the CFPB said.

In other cases, consumers were misled about the benefits of an “account protector” program intended to offer relief after a major life event, such as unemployment or temporary disability.

AmEx said most of the costs associated with the settlements were already accounted for in previous quarters and that most of the remediation to customers has already been paid.

“American Express has cooperated fully with the CFPB, FDIC and OCC,” the company said in the statement, adding that it “continues to conduct internal reviews designed to identify issues, correct them and ensure that its products and practices meet a high standard of quality.”

Regulators had penalized the company last year for other violations related to credit-card add-on products in a deal that totaled US$112.5 million.

In that settlement, the firm was accused of deceiving customers who signed up for certain cards, leading them to believe they would receive benefits they did not.

American Express shares rose to a record US$88.69 on Tuesday.

The shares have climbed 54 percent this year, the second-best performance in the Dow Jones Industrial Average.

In October, AmEx announced its third-quarter profits rose 9.3 percent to US$1.37 billion.

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