American Express Faces U.S. Action on Late Fee Practices

American Express said it faces U.S. enforcement action over late fees on its revolving-credit charge cards as part of an “increasingly complex and robust” regulatory environment.

AmEx said regulators – the Federal Deposit Insurance Corp. and the Utah Department of Financial Institutions – are looking at how its subsidiary, Centurion Bank, has complied with certain consumer protection laws and regulations, “including the way late fees are assessed on charge cards with a lending feature.”

This action by the regulators may include civil money penalties and “require additional refund obligations” to AmEx card holders.

American Express – the top credit card provider by purchases – revealed this yesterday in its annual regulatory filing.

Centurion Bank issues and services AmEx consumer charge and revolving credit cards in the United States, including the Blue, Blue Cash, Blue Sky, Gold, Platinum, and Centurion cards.

New York-based American Express said that it was notified this month by the FDIC on a pending “formal enforcement action,” and that it appears likely that the Consumer Financial Protection Bureau (CFPB) and Utah authorities will take “some type of action against Centurion Bank as well.”

The CFPB was created by the Dodd-Frank Wall Street reform legislation of 2010 to protect U.S. consumers from unfair or deceptive lending practices. It now oversees the biggest credit card issuers.

Moreover, President Obama signed into law in 2009 sweeping credit card reform that included certain restrictions or prior notice requirements on penalty fees.

AmEx said Centurion Bank has made changes to some of its card practices – and established an accrual for late fees it expects to refund.  Additionally, it could be required to make further changes to its card practices to respond to regulatory concerns, AmEx said in its filing.

Throughout its filing, American Express made reference to the expanded reform laws covering the credit card and banking industries.

“The regulatory environment in which we operate has become increasingly complex and robust, and following the financial crisis of 2008, supervisory efforts to apply relevant laws, regulations and policies have become more intense,” American Express said.

Here is the rest of that statement:

“The U.S. Congress and regulators, as well as various consumer advocacy groups, have continued to focus their attention on certain practices of credit card issuers, such as unfair and deceptive business practices, increases in annual percentage rates (“APRs”), changes in the terms of the account, and the types and levels of fees and financial charges charged by card issuers for, among other things, late payments, returned checks, payments by telephone, copies of statements and the like.”