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American Express to pay $75 million over credit-card practices

Staff writer |
The Consumer Financial Protection Bureau has ordered American Express to pay more than $75 million to settle claims that it charged improper fees and misled its credit card customers over so-called add-on products like identity fraud protection.

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American Express will have to refund $59.5 million to more than 335,000 consumers over what the bureau called "illegal credit card practices." American Express will also have to pay a $9.6 million cash penalty to the bureau. The bureau said one problematic product involved American Express's "account protector," which was marketed as a way for customers to wipe out their minimum monthly payment if they lost their job or had a disability.

But the bureau said that in reality, the benefit payment was limited to 2.5 percent of the consumer's outstanding balance, up to $500. In many cases, the amount that was canceled was less than the minimum payment due. The bureau also says American Express unfairly charged interest and fees, some of which caused customers to exceed their credit limits, resulting in additional fees.

The agency also took issue with how the company billed for its identity-fraud protection services. The bureau said that American Express began charging consumers fees for the service, sometimes for several years, even before it had obtained the authorization necessary to actually begin monitoring the consumers' credit records.

The bureau said about 85 percent of customers who enrolled were billed even though they did not get the benefit. "In some cases, consumers paid for these services for several years without receiving all of the promised benefits," the bureau said in a statement.

Another product was the company's Lost Wallet product, which was intended to assist card members in Puerto Rico with canceling and replacing lost or stolen credit cards. The bureau said that product was not adequately marketed in Spanish. As a result, customers were not properly informed of the required steps necessary to take advantage of the product.

American Express said it had taken steps to rectify the problems. It will also issue refunds to customers who were affected by the settlement or checks to consumers who no longer hold accounts with the company.

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