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| Some will rob you with a six gun Some with a fountain pen. |
Capital One and Discover were fined more than $200 million each this summer for pushing questionable payment protection plans. Last week, American Express got dinged for $112 million. The CFPB found American Express had discriminated against older customers, collected debts improperly and failed to report consumer disputes to the credit bureaus.
The American Banker said the fine should scare bankers:
The broad reach of the American Express action is clearly intended as a warning to other banks, observers said.
"This order is putting everyone on notice that the regulators are looking for any potentially misleading or deceptive practices when it comes to interacting with consumers," said Jaret Seiberg, a financial services policy analyst with Guggenheim Securities. "No one should have had any doubt beforehand that the regulators were actively investigating every interaction between card companies and consumers. But if you had any doubt, this erases it."One lawyer said it looks as if CFPB tried to enforce a lot of existing laws.
That's exactly what Cordray said in a press release:
Several American Express companies violated consumer protection laws and those laws were violated at all stages of the game — from the moment a consumer shopped for a card to the moment the consumer got a phone call about long overdue debt.Here's the kind of crap American Express was pulling: promising bonus points and then reneging; charging late fees based on a percentage of the borrowers' debt (that's illegal); giving older applicants different credit scores; lying to applicants. Now the company has to pay restitution of about $340 to every person it cheated.
The CFPB was created in 2010 as part of the Dodd-Frank financial reform act. But it was the brainchild of Massachusetts Senate candidate Elizabeth Warren.
Would American Express be fined for ripping off customers if the CFPB didn't exist? Here's one answer from Isaac Boltansky, an analyst with Compass Point Research and Trading:
Now that we have the Dodd-Frank Act and a regulator who is for the first time charged with focusing on consumer financial issues, there was a driving force to get a coordinated and complete settlement action in place. I don't think that this action would have happened on the same scale or the same timeline without a Consumer Financial Protection Bureau.Nice to know there's a new cop on the beat.
