October 01, 2012
Federal Reserve Board issues consent order and order of assessment of a civil monetary penalty against American Express Company and American Express Travel Related Services Company
For immediate release
The Federal Reserve Board on Monday announced a formal enforcement action, including a $9 million civil money penalty, against American Express Company (Amex) and American Express Travel Related Services Company, Inc. (TRS) to address deceptive marketing and debt collection practices and associated deficiencies in compliance risk management and internal audit. Amex and TRS are both registered bank holding companies based in New York.
TRS provides debt collection and marketing services to its subsidiary banks, American Express Centurion Bank (AECB) and American Express Bank, FSB (AEFSB), and also services its own credit card portfolio. In providing those services, TRS allegedly led customers to believe that their defaulted debt would be "waived" or "forgiven" by acting on a settlement offer without also disclosing the effect that settling for less than the full debt would have on the customers' future credit opportunities. TRS also allegedly made deceptive representations in credit card solicitations concerning the benefits customers would receive by acting on the offer. The Federal Reserve also found that deficiencies in compliance risk management and internal audit, which are firm-wide functions at Amex, allegedly allowed these practices to occur.
The Board's action was taken in coordination with the Consumer Financial Protection Bureau, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, and the Utah Department of Financial Institutions. Each agency is announcing formal enforcement actions against entities in the American Express organization that they supervise, which include AECB and AEFSB. TRS's credit card customers affected by the allegedly deceptive practices will be compensated according to the CFPB's enforcement action against TRS.
In addition to the $9 million civil money penalty, the Board's enforcement action requires Amex and TRS to improve consumer compliance oversight and compliance risk-management and internal audit programs.
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