Summary
American Express Company (AXP) filed an 8-K on June 30, 2009, to disclose settlement agreements between its wholly-owned subsidiaries, American Express Centurion Bank (AECB) and American Express Bank, FSB (AEBFSB), and regulatory bodies. These settlements address issues related to the decline of convenience checks used by certain cardmembers, a decline triggered by changes in the cardmembers' risk profiles. As part of the settlements with the Federal Deposit Insurance Corporation (FDIC) and the Office of Thrift Supervision (OTS), the Banks will collectively pay a civil money penalty of $500,000 ($250,000 each) and make payments to affected cardmembers for fees incurred due to the declined convenience checks, estimated to total approximately $3.5 million. Additionally, the company has agreed to adjust its convenience check program practices and disclosures and to aid qualifying cardmembers in removing their names from 'bad check' registries. Importantly, neither subsidiary admitted nor denied any wrongdoing in reaching these agreements.
Key Highlights
- 1American Express subsidiaries, AECB and AEBFSB, reached settlement agreements with the FDIC and OTS, respectively.
- 2The settlements are related to the decline of convenience checks for certain cardmembers due to risk profile changes.
- 3AECB and AEBFSB will pay a combined civil money penalty of $500,000 ($250,000 each).
- 4The company expects to pay approximately $3.5 million in fees to qualifying cardmembers affected by the declined convenience checks.
- 5American Express has agreed to modify practices and disclosures related to its convenience check programs.
- 6The company will assist qualifying cardmembers in removing their names from 'bad check' registries.
- 7Neither subsidiary admitted nor denied any violations of law in reaching these settlements.