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).
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
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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