The newly-created Consumer Financial Protection Bureau is making another headline. This week, the CFPB announced a settlement with American Express over the company's marketing practices.
American Express admitted to no wrongdoing, but it will pay fines of $112.5 million for credit card practices going back to 2003. The company will reimburse some $85 million to 250,000 customers. A week earlier, the CFPB struck a settlement with Discover, and a month ago it settled with Capital one.
American Express is accused of leading customers to believe they would receive a sign on bonus that was never to be paid out. Cardholders were also charged late fees that were not allowed under the CARD Act, which required banks to change their policies and charges for late payment fees. Finally, American Express is accused of discriminating against older customers, a practice which the company denies.
An aggressive regulatory environment is changing the credit card landscape. While banks were previously left virtually unregulated, the CFPB has been a pit bull in the realm of consumer finance. The bureau will likely settle with all major credit card companies this year while demanding that they return millions of dollars in fees to customers who the CFPB alleges were falsely charged.
The CFPB is one of the newest reforms in the consumer financing space. It will be tasked with monitoring the market for consumer financing products and moderating the industry to ensure that all companies operate within the constraints of recently passed regulatory reforms. The CFPB’s power extends beyond credit cards and into other financial services including automotive loans, student lending, and mortgage issuance.