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AmEx to pay millions for unfair marketing of financial services; penalty too small to change anything.

Pinpointed by three U.S. agencies – CFPB, OCC and FDIC – American Express Co. agreed to pay $75.7 million for its deceptive marketing of financial services added to credit cards.

English: no original description

American Express logotype (Photo credit: Wikipedia)

AmEx is ordered to refund an estimated $59.5 million to more than 335,000 consumers for illegal credit card practices and pay an additional civil money penalty fine of $9.6 million to U.S. Treasury. According to CFBP, American Express between 2000 and 2012 has misled its consumers in its marketing related to:


  • The benefits of the payment protection products: Some consumers were led to believe that if they bought the Account Protector product, their minimum monthly payment would be cancelled if they experienced a qualifying life event. In reality, the benefit payment would be limited to 2.5 percent of the consumer’s outstanding balance, up to $500. In many cases, that amount was less than the minimum payment due.

  • The length of coverage of the payment protection products: Consumers were led to believe that the benefit periods for Account Protector would last up to 24 months. In fact, only two of the 13 qualifying events with benefit periods had benefit periods of up to 24 months. The other 11 qualifying events had benefit periods of only one, two, or three months.

  • The fees associated with payment protection products: American Express or its vendors would claim that there would be no fee if the balance in the account was paid off every month, without disclosing that the account balance had to be paid off before the end of the billing cycle, which was an earlier date than the consumer’s statement due date.

  • The terms and conditions of the Lost Wallet product: American Express used telemarketing sales calls conducted in Spanish to enroll the vast majority of Puerto Rico consumers in this product. Yet American Express did not provide uniform Spanish language scripts for these enrollment calls, and all written materials provided to consumers were in English. As a result, American Express did not adequately alert consumers during the calls about the steps necessary to receive and access the full product benefits.
    Consumers were not informed during telemarketing calls or during the enrollment process for identity theft products that two steps were necessary to fully utilize credit monitoring and public records monitoring benefits. The second step was not completed by 85 % of consumers. These consumers were thus unfairly billed for benefits they did not receive.

AmEx was also found guilty of unfair billing for the services consumers never received, as well as of failure to inform its consumers about their right to obtain free credit report form federal sources.


It all looks like a success of the federal regulators in protecting consumer rights. Unfortunately it is not the case at all. The amount of the total fine and repayments ordered is negligible for the stakeholders of American Express, a company which profits in the third quarter of 2013 were at $1.37 billion level. Let us remind you that the practices AmEx is now being penalized were in place for 12 years. Also from the consumer point of view repayment means not much at all. An Average misled Joe Doe will receive just around $177 (or less taking into account all the “operational costs” on the way).


No wonder that Wall Street welcomed the news with the record valuation for American Express Co. (AXP) which trades at $89 in the time of writing this article. What message it gives to the public? Is it worth to cheat consumers in financial services marketing?




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