Enforcement

As a result of today’s order, American Express must repay an estimated $85 million to approximately 250,000 consumers. American Express will return the money directly into the accounts of the affected consumers. If the consumer no longer holds the American Express card, American Express will mail a check or credit any outstanding balance.

• Customers who were promised $300 for signing up for a Blue Sky Credit Card will get the $300.
• Consumers who paid an illegal late fee will be reimbursed, with interest.
• Consumers who paid old debt in response to deceptive promises to report payment to credit bureaus will be reimbursed the money they paid plus interest.
• Consumers who were promised their debt would be forgiven but were denied new American Express cards because the debt was not really forgiven, will receive $100 and a pre-approved offer for a new card with terms we and the FDIC find acceptable. If the consumer already paid the waived or forgiven amount in order to get a new card, they will be refunded that amount plus interest.

Consumers are not required to take any action to receive their credit or check.

If you are one of the consumers affected by the order, American Express will notify you directly. They are responsible for notifying any affected consumers – any other entity that offers to help reclaim your money is likely a scam.

Today, in close partnership with our fellow banking regulators, we are ordering three subsidiaries of the American Express Company to put some $85 million back into the wallets of consumers. The subsidiary companies will modify various credit card practices found to be illegal, make full refunds to approximately 250,000 customers, and pay $14.1 million in fines.

Over the course of a long, multi-agency investigation, we found that at every stage of the consumer experience − from advertising to enrollment to payment to collection – these American Express subsidiaries had violated various consumer financial laws.

The Federal Deposit Insurance Corporation (FDIC), along with the Utah Department of Financial Institutions, uncovered the problems during a routine examination in February 2011. After the Consumer Financial Protection Bureau (CFPB) opened its doors for business five months later, we inherited many of the consumer protection functions of the FDIC, and the case was passed on to us.

Upon further investigation, we learned that the problems were widespread.

Our investigations found that when consumers were shopping for credit cards, one American Express company sent potential customers misleading credit card offerings in the mail. When consumers applied for cards, the same company engaged in practices that unlawfully discriminated on the basis of age. In connection with consumers paying their bills, American Express companies violated consumer financial laws. For example, we found that these American Express companies charged consumers excessive late fees.

And we found that all three American Express subsidiaries − American Express Centurion Bank and American Express Bank, FSB, along with their parent company and affiliate, American Express Travel Related Services Company, Inc. – misled people into paying off old debt by telling them that it would be reported to the credit bureaus and their credit scores would improve. In fact, the debt was not reported to the credit bureaus and in any event it was so old that it may not have appeared in credit reports anyway.

So today, multiple agencies are joining together to require the American Express companies to refund money to consumers, pay fines, and change their practices. This includes not only the CFPB and the FDIC, but also the Board of Governors of the Federal Reserve System and the Office of the Comptroller of the Currency. The State of Utah will also be taking its own related action through its Department of Financial Institutions.

We are ordering the American Express subsidiaries to make a full refund of approximately $85 million to consumers who were harmed. The American Express subsidiaries will identify those consumers, notify them, and make sure they get their money back. The burden will not fall on customers to pursue their refunds. To ensure compliance with all terms of the agreements, the companies will hire independent auditors to verify that the orders are being carried out.

Under the non-monetary terms of the Consent Order with American Express Centurion Bank, the bank is required to stop deceiving consumers by falsely promising a rebate or a points feature on credit cards or any other card. The company will have to ensure that it does not unlawfully discriminate based on age in deciding who qualifies for a credit card. And the bank and American Express Bank, FSB will properly report disputes to credit bureaus and make sure that cardholders are informed of their rights. They will also stop charging consumers the illegal late fees.

The Bureau is also issuing a consumer advisory today. The advisory will inform consumers who were harmed about how they will benefit from this action and how they will receive money, if they are eligible.

We share the same task with these companies themselves: to make sure that every business is following the rules. Consumers expect and deserve that. We will continue to work steadily toward this objective.

The mission of the CFPB is to ensure compliance with federal consumer financial laws through effective enforcement of those laws. When the Office of Enforcement needs to gather information, it may issue a Civil Investigative Demand (CID) to people and institutions that may have materials relevant to an investigation. The law that created the CFPB gives us the authority to gather information this way, and several other federal agencies have similar processes.

We carefully consider what to request in each Civil Investigative Demand. A recipient of a CID may challenge a CID by petitioning the CFPB’s Director. The Director can respond in three ways: he can reaffirm our decision to obtain the information, modify the demand, or set it aside altogether. Director Cordray issued his first ruling on a petition this week. He ordered PHH Corporation, a mortgage lending company, to comply with the Civil Investigative Demand within 21 days.

Although we do not generally comment on confidential law enforcement investigations, we’re committed to telling the public what we can, when we can, about our work to protect consumers. That’s why our rules relating to investigations say that when someone challenges a Civil Investigative Demand and the Director responds, these are generally public records. We will generally post them on our website when we can.

The Consumer Financial Protection Bureau (CFPB) has determined that Capital One marketed certain “add-ons” – fee-based services added to credit card accounts – in a way that violated federal law. As a result of enforcement action by the CFPB, Capital One agreed to automatically refund $140 million to 2 million Capital One customers.

Capital One customers: If you’re eligible for a refund and you have an open account, the refund will be automatically credited to your account. If you’re eligible but no longer have an account with Capital One, a check will be mailed to you. You should expect to receive your refund later this year. You don’t need to take any action to get your refund.

If you have questions about whether you are entitled to a refund, please contact Capital One.

Watch out for scammers claiming that they will get you a refund: When large numbers of consumers get refunds, scammers sometimes pop up. The scammer may charge you a fee or try to steal your personal information. If someone tries to charge you, tries to get you to disclose your personal information, or asks you to cash a check and send a portion to a third party in order to “claim your refund,” it’s a scam. Call us at (855) 411-CFPB.

Today, the CFPB is posting three final rules and one interim final rule that we have sent to the Federal Register for publication. The rules deal with our procedures and practices related to enforcing federal consumer financial law. These rules allow the agency to stay abreast of developments in consumer financial law, investigate possible violations of these laws, and bring actions to enforce these laws, helping us better serve our mission of protecting American consumers.

The three final rules deal with the agency’s investigative and adjudicative processes and our interactions with state law enforcement authorities. We published interim versions of these rules in July of 2011. During an extensive comment period that followed, we received and evaluated public input on the interim rules, and we have made certain changes to improve and clarify the rules.

Rule Relating to Investigations: This rule describes the CFPB’s procedures for investigating whether persons have engaged in conduct that violates federal consumer financial law. Similar to rules used by other regulators, it lays out an efficient and fair process for conducting CFPB investigations. This rule sets forth our authority to conduct investigations, including the procedures for issuing civil investigative demands. It also describes the rights of persons from whom the CFPB seeks to compel information in investigations.

Rule of Practice for Adjudication Proceedings: Under this rule, the CFPB can conduct administrative adjudications (hearings) to ensure or enforce compliance with federal laws and regulations. In developing this rule, we leveraged the experiences of other regulators and reviewed the public comments on the interim rule to create a fair and expeditious process for resolving administrative enforcement actions. The result is an adjudication process that is streamlined and protects parties’ rights to fair and impartial proceedings.

State Official Notification Rule: This rule is designed to help the CFPB stay informed about state-level legal developments relating to the Dodd-Frank Act. It describes the process through which state officials update the agency on certain legal actions they bring to enforce compliance with certain provisions of the Dodd-Frank Act and regulations the CFPB may issue. Proper notification will help ensure that the law is being enforced in a consistent manner.

The last rule is an interim final rule that implements the Equal Access to Justice Act (EAJA). We are now asking for public input on this interim final rule.

EAJA Implementation Rule: This rule implements the Equal Access to Justice Act. The Act provides that certain prevailing parties in administrative proceedings can recover attorney fees and expenses. The rule sets forth who can seek to recover these costs and how to do so. It is based on model rules and rules used by other agencies. The public can comment on the interim final rule for 60 days after its publication in the Federal Register.

These rules will be published in the Federal Register in the near future and will be effective immediately upon publication. The versions linked in this post contain the text as we submitted them.

Ori Lev is the CFPB’s Deputy Enforcement Director for Litigation.

Today, we proudly announced a joint effort with state Attorneys General and the Department of Defense to combat scams directed at servicemembers, veterans, and their families. Recognizing that this population is often targeted by financial scams, we created the Repeat Offenders Against Military Database (ROAM) to track companies and individuals who repeatedly target the military community. (more…)