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From Banking and Finance Law Daily, August 23, 2017

CFPB faults Amex over credit terms offered in Puerto Rico and U.S. territories

By John M. Pachkowski, J.D.

The Consumer Financial Protection Bureau filed an administrative action against American Express Centurion Bank and American Express Bank, FSB for discriminating against consumers in Puerto Rico, the U.S. Virgin Islands, and other U.S. territories, namely Guam, American Samoa, and Northern Mariana Island, by providing them with credit and charge card terms that were inferior to those available in the 50 states. The CFPB also found that the banks discriminated against certain consumers with Spanish-language preferences. The two banks are subsidiaries of American Express Company and American Express Company’s credit and charge card lines of business.

Review and reporting. The CFPB’s action arose after a supervisory review regarding the differences in credit card terms offered to customers in Puerto Rico, the U.S. Virgin Islands, and the other U.S. territories as opposed to those terms offered to customers in the 50 States. Since 2013, American Express Company had self-reported the differences in the credit cards terms offered. Also, during the Bureau’s review, American Express paid approximately $95 million in consumer redress.

CFPB’s conclusions. The Bureau’s review concluded that, from at least 2005 to 2015, American Express’ Puerto Rico cards had different—and often worse—pricing, rebates, and promotional offers, underwriting, customer and account management services, and collections practices than its U.S. cards. It should be noted that the CFPB’s review did not find that American Express intentionally discriminated against its customers but rather found that these differences were the result of American Express’ card management structure, which had different business units overseeing its Puerto Rico cards and U.S. cards.

Redress. The Bureau determined that these actions violated the Credit Opportunity Act and its implementing regulation—Regulation B—and entered into a consent order with the banks. Under the terms of the consent order, the banks were required to:

  • fully remediate the harmed consumers and pay at least an additional $1 million to redress harmed consumers who have not yet been fully compensated; and
  • not discriminate against residents of Puerto Rico, the U.S. territories, and consumers with a Spanish-language preference.

The Bureau did not assess penalties based on a number of factors, including that American Express self-reported the violations to the Bureau, self-initiated remediation for the harm done to affected consumers, and fully cooperated with the Bureau’s review and investigation.

No confines to protection. Commenting on the administration action, CFPB Director Richard Cordray said, "Consumer financial protections are not confined within the 50 states. American Express discriminated against consumers in Puerto Rico and the U.S. territories by providing them with less-favorable financial products and services. They have ceased this practice and are making consumers whole."

No discrimination. In a statement, American Express Company refuted the CFPB’s conclusion that the credit practices amounted to discrimination. The company said, "American Express absolutely does not agree with this claim. The company is committed to making its products available to every qualified person regardless of race or ethnic background, and it does not use race or ethnicity as a determining factor for credit. American Express does not tolerate discrimination in any form and is committed to ensuring that consumers are treated fairly. Having long since taken actions that the CFPB subsequently ratified, the company decided to settle with them rather than go through years of litigation that would have provided no additional value to any of its customers."

Companies: American Express Bank, FSB; American Express Centurion Bank; American Express Company

MainStory: TopStory CFPB ConsumerCredit CreditDebitGiftCards EnforcementActions EqualCreditOpportunity

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