The Consumer Financial Protection Bureau has ordered American Express to pay more than $75 million to settle claims it charged improper fees and misled its credit-card customers over so-called add-on products like identity-fraud protection.
American Express will have to refund $59.5 million to more than 335,000 consumers over what the bureau called “illegal credit-card practices.” It will also have to pay a $9.6 million penalty to the bureau, according to a statement issued Tuesday.
The settlement is the latest enforcement action aimed at cracking down on credit-card companies, which have come under tougher scrutiny as federal regulators have sought tighter restrictions on hidden fees and penalties.
The bureau said one problematic product involved American Express’ “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.
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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 American Express began charging consumers fees for the service, sometimes for several years, even before it had obtained the authorization to actually begin monitoring the consumers’ credit records.
The bureau said about 85 percent of customers who enrolled were billed, sometimes for several years, even though they did not get the benefit.
Another product was the company’s “Lost Wallet” service, 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 steps necessary to take advantage of the product.
American Express said it had taken steps to rectify the problems. It will issue refunds to customers affected by the settlement or checks to consumers who no longer hold accounts with the company.
“As previously reported, American Express continues to conduct internal reviews designed to identify issues, correct them and ensure that its products and practices meet a high standard of quality,” the company said in a statement.
In addition to paying penalties and issuing reimbursements, American Express was ordered to hire an independent third party to review the company’s add-on products.
The agency said the settlement covered consumers who were customers from 2000 to 2012.
The company will also pay $3.6 million to the Federal Deposit Insurance Corp. and $3 million to the Office of the Comptroller of the Currency, which worked with the bureau on the investigation.
American Express has previously come under fire for its credit-card business. Last year, the consumer agency ordered the company to return $85 million to those who had been victims of illegal marketing, billing and debt-collection practices.
The regulators have been conducting an industrywide investigation into the sale of credit-monitoring products, reflected in the consumer bureau’s first enforcement action taken against Capital One Financial in July 2012. Capital One paid $210 million in penalties and restitution, and accepted restrictions on how it markets the products.
Bank of America has been negotiating with the bureau to settle allegations it also deceived customers of add-on products, two people briefed on the talks said. Including Bank of America, the bureau’s investigation has reached all the top six credit-card issuers, which account for 68 percent of the market by loans outstanding, according to data compiled by Bloomberg.
The agency also reached settlements with Discover Financial Services and JPMorgan Chase, and Citigroup said in March it may face penalties from U.S. regulators over the sale of the products.
Information from Bloomberg News was included in this report.