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American Express Bank Pays $112 Million To Settle Deceptive Practices Claims

WASHINGTON, D.C. - (Mealey's) The Federal Deposit Insurance Corp. and the Consumer Financial Protection Bureau (CFPB) announced Oct. 1 that they have reached a settlement with American Express Centurion Bank, Salt Lake City, Utah, for deceptive debt collection and credit card marketing practices, with the bank agreeing to pay $85 million to more than 250,000 affected consumers and civil money penalties totaling approximately $27 million (In re:  American Express Centurion Bank Salt Lake City, Utah, No. FDIC-12-315b, No. FDIC-316k, FDIC; No. 2012-CFPB-002, CFPB). 

(Order available. Document #88-121022-259R.)

According to a joint consent order, joint order for restitution and joint order to pay civil money penalty filed by the FDIC and the CFPB, the bank neither admits nor denies liability. 

The action resulted from an FDIC and Utah Department of Financial Institutions (UDFI) examination, in which the CFPB joined last year, according to a press release from the FDIC.  The CFPB, the Office of the Comptroller of the Currency, the UDFI and the Board of Governors of the Federal Reserve System took separate actions against various entities related to the bank, according to the release.  Under the settlements, the bank agreed to the issuance of today's orders, which result in a total restitution from all entities of approximately $85 million to more than 250,000 affected customers, as well as the imposition of civil money penalties totaling approximately $27 billion. 

Federal Violations  

According to the release, the FDIC and the CFPB determined that the bank violated federal law prohibiting unfair and deceptive practices by, among other things:  misrepresenting to consumers that if they entered into an agreement to settle old debt, such settlement would be reported to consumer reporting agencies and thereby improve the consumers' credit scores; using settlement solicitations that implied that consumers who entered into settlement agreements to partially pay such debts would have the remaining balance of their debts forgiven; and using solicitations that misrepresented the points and awards consumers would receive upon enrollment in one of American Express' credit card products. 

In addition to restitution and the civil money penalty, the order also requires the bank to correct all violations, provide clearly written disclosures on debt collection statements and stop using deceptive credit card solicitations.  The bank has also agreed to improve its compliance management system and improve board oversight of affiliates and third-party service providers in order to adequately manage third-party risk. 

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