The investigation by the Consumer Financial Protection Bureau (CFPB) into American Express uncovered a series of misleading and potentially exploitative practices tied to their credit card add-on products. At the heart of the issue were products like the ‘Account Protector’ and various identity protection services, which were marketed as essential tools for financial security but, in practice, burdened consumers with hidden costs and deceptive terms.
Account Protector Discrepancies:
American Express’s Account Protector program was advertised as a financial safety net, designed to cover minimum monthly payments in times of personal crisis such as job loss, severe illness, or significant life changes. However, the actual coverage provided was less comprehensive than consumers were led to believe. For instance, the benefit payment, rather than covering the full minimum payment as many customers assumed, typically amounted to only 2.5% of the outstanding balance or a maximum of $500, often leaving a significant shortfall that the cardholder was still responsible for covering. This stark discrepancy between expected and actual benefits left many customers financially exposed when they were most vulnerable.
Moreover, the fees associated with this program were not clearly communicated. Customers were charged 0.85% of their card balance each month, which could accumulate quickly and significantly increase their financial burden, contrary to the program’s purported aim of easing it. These charges were levied regardless of whether the customer actually activated or used the protection, a detail not adequately disclosed in the marketing materials.
Identity Protection Product Flaws:
The identity protection services offered by American Express included features like credit monitoring and alerts, intended to protect customers from identity theft. However, full activation of these services required customers to complete additional steps, which were not clearly disclosed at the time of enrollment. Many customers remained partially unprotected, having not completed these necessary steps, yet they were still fully charged for the service. This lack of transparency meant that customers paid for, but did not receive, the full protective benefits they were sold.
In several instances, American Express also failed to provide mandatory disclosures related to the availability of free credit reports, which are required by law to be mentioned during the marketing of such services. This omission further obscured the true value and cost of the services, misleading consumers about their rights and the product’s benefits.
These practices not only imposed undue financial strain on consumers but also eroded trust in American Express. Customers entered these agreements under the impression that they were making prudent decisions to safeguard their financial futures, only to find themselves grappling with unexpected fees and inadequately disclosed terms that compromised their financial stability rather than enhanced it.