American Express settled the Consumers Financial Protection Bureau or CFPB’s discrimination review by paying $96 million to credit
The U.S Consumer Financial Protection Bureau announced that more than 200,000 consumers at two of the company’s subsidiaries had been hurt by the practices, which also included stricter credit cutoffs and less debt forgiveness that offered to customers in U.S. states.
The New York-based lender disclosed having incurred at least $96 million in claims to settle cardholders’ discrimination.
The discrepancy surfaced during the company’s internal review process of its card product offerings in Puerto Rico, the U.S. Virgin
The findings point to the fact that the terms and conditions and other frills and facilities provided on cards issued to customers in these regions were less generous and attractive compared to the ones issued in the Continental U.S.
American Express clarified that cards issued in any region are accordingly modified to make sure that its services and benefits are locally relevant to provide superior value to its card members.
The company said in a statement the discrepancy was discovered in an internal review and reported to the CFPB in 2013. The company voluntarily agreed to provide $95 million in compensation to affected
“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,” American Express said.
The CFPB ordered the company to pay an additional $1 million on top of the $95 million and establish new guidelines to make sure the terms of its card offerings were not discriminatory in the future.
AmEx’s Recent Struggles
The settlement between the bureau and AmEx, which hasn’t been charged any civil penalties because it reported the matter voluntarily, eliminates at least one of the challenges facing CEO Kenneth Chennault.
The 66-year-old has been working to replace revenue lost with the lucrative Costco portfolio since 2015, in part through rewards programs such as Pienti and an upgrade to its signature Platinum charge card.
American Express has in the recent past sustained weak results from parting ways with one of its major clients Costco Wholesale Corp last year.
In order to make up for the loss from this foregone business, the company took up massive marketing expenditure and won some clients and deals though not as big as Costco.
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