American Express Agrees to Refund $85 Million American Express will reimburse $85 million to about 250,000 customers to resolve accusations that the company violated federal law in its marketing, billing and debt collection practices, the company and the government said Monday. The settlement is the latest in a series of enforcement actions that federal and state regulators have brought against some of the nation's largest financial institutions for problems in their credit card businesses. In each of the cases, regulators have exposed critical flaws in how the banks monitor vendors that perform central business functions. The multiagency investigation of American Express included the Consumer Financial Protection Bureau, the Federal Reserve, the Office of the Comptroller of the Currency and the Utah Department of Financial Institutions. They discovered violations of consumer protection laws between 2003 and this year that started "from the moment a consumer shopped for a card to the moment the consumer got a phone call about long overdue debt," Richard Cordray, the director of the consumer protection bureau, said in a statement. To win customers for its Blue Sky travel reward credit card program, the lender sometimes offered customers a misleading promotion. Some customers thought they would receive a $300 reward, but that never materialized, the regulators said. In doling out credit, they said, American Express also discriminated against applicants based on their age. The company also duped consumers into paying off stale credit card debt with the promise of improving their credit score, the investigators said; in fact, regulators found, American Express was not reporting the payments to the credit bureaus at all. The action was directed at the two main bank subsidiaries of American Express, Centurion Bank and American Express Bank, FSB, which are both based in Utah and issue credit cards. Also singled out was American Express Travel Related Services Company, which provides support and marketing for the banking units. American Express customers should expect refunds by March 2013, regulators said. The company also agreed to pay $27.5 million in fines to the regulators. American Express, long known for its aspirational cards and wealthier customer base, said it had outlined plans to address each of the violations and "cooperated fully" with regulators. The company is the country's biggest credit card issuer by purchase volume. Last year, the lender had revenue of $30 billion, up 9 percent from a year earlier. The move against the bank is part of a broader push by federal and state regulators to protect consumers from illegal credit card and debt collection practices as millions of Americans struggle to pay their bills in a floundering economy. So far this year, the newly minted Consumer Financial Protection Bureau has leveled enforcement actions against Capital One and Discover Financial over sales tactics. Last week, Discover agreed to pay $200 million to more than 3.5 million cardholders who bought credit protection services over the phone, and $14 million in civil penalties to banking regulators. Through those actions alone, the bureau has forced credit card companies to give refunds to more than five million customers. In each of the three cases, the regulators found that the companies failed to monitor so-called third-party vendors. In the action against Capital One, for example, the consumer bureau took aim at a company that used high-pressure marketing tactics to persuade consumers to buy expensive and largely unnecessary products presented as a way to protect them from identity theft and hardships like unemployment or disability. In the latest move against American Express, federal regulators said that "all violations" aside from the credit discrimination "are attributed to deficient management oversight of the bank's service providers." Problems at American Express surfaced in February 2011 during an examination of Centurion Bank, and soon the Consumer Financial Protection Bureau was delving into similar issues at the other two American Express units. Particularly vexing, consumer advocates said, were the bank's debt collection practices. Appealing to consumers who wanted to clean up their credit scores, a crucial metric that is used beyond the lending arena to sometimes even determine employment eligibility, American Express told customers that those scores would improve if they paid off old debts. Despite those promises, regulators found, American Express never reported those payments to the credit agencies. Many of the debts were so old that they no longer marred the credit reports at all. Regulators accused American Express of "deficient" compliance systems. As a result, some bank employees who pitched credit cards were not given adequate training or information about all the applicable federal laws. Adding to a deficit in oversight, regulators found, was turnover in Centurion bank's chief compliance officer. Regulators said that position "turned over frequently," undermining the compliance monitoring. American Express has so far dodged censure for its payment protection plans, which were at the center of the consumer agency's actions against Capital One and Discover. The company said it stopped marketing those services earlier this year and is cooperating with regulators. Such products have drawn the ire of state attorneys general who have said that they prey on customers" fears, particularly those who are anxious about a persistent recession. Typically, the products promise to forgive or trim the debts of card holders in the event they lose their jobs, become disabled or die. In a statement, American Express said it was "continuing its own internal reviews and is also cooperating with regulators in their ongoing regulatory examination of add-on products in accordance with an industrywide review." Monday's enforcement action was "intended as a message to all entities," said Kent Markus, assistant director of enforcement for the consumer bureau. There are consequences for violating the law. Under the deal with regulators, American Express must halt the deceptive practices and set up independent auditors to ensure that its practices comply with consumer protection laws. The fines and customer refunds will be paid, for the most part, by reserves established in previous quarters, American Express said.