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Consumer Financial Protection Bureau alleges disparate treatment for U.S. territories

The Consumer Financial Protection Bureau (CFPB) has issued a Consent Order addressing alleged disparate treatment by banks in overseas territories of the United States. The Consent Order illuminates the CFPB’s approach to disparate treatment claims and provides a caution for financial institutions in their collection practices.

On Aug. 23, 2017, the CFPB issued a Consent Order regarding the charge and credit card practices of American Express Centurion Bank and American Express Bank, FSB (together, Amex or the banks), two American Express banking subsidiaries. Under the Order, the CFPB and the banks agreed to a compliance plan and audit, in addition to the banks’ voluntary provision of $95 million in remediation. At issue were the banks’ practices in overseas territories of the United States, including Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa and the Northern Mariana Islands.

The CFPB alleged that Amex issued and managed cards in overseas territories, including its Green, Gold and Platinum cards, from a different division than its mainland consumer services division. This separate management allegedly resulted in a number of violations of the Equal Credit Opportunity Act, 15 U.S.C. § 1691, which prohibits a creditor from discriminating on the basis of race, color, religion, national origin, sex or marital status, or age.

Amex’s alleged violations included:

(1) higher fees and interest rates, and lower rebates than comparable mainland cards;

(2) underwriting and line assignment differences that were established on geographic and product levels rather than the individual creditworthiness of applicants;

(3) adverse credit actions that were not imposed on comparable mainland cardholders; and

(4) the use of different collection agencies than those used in the mainland, resulting in higher debt settlements, in addition to other collection disparities.