American Express Company

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IN THE MATTER OF AMERICAN EXPRESS COMPANY CONSENT ORDER, ETC. , IN REGARD TO ALLEGED VIOLATION OF THE FEDERAL TRADE COMMISSION AND TRUTH IN LENDING ACTS Docket C-3129. Complaint, Jan. 1984-Decision, Jan. 9, 1984 This order requires a New York City credit card company, among other things, to cease failing to prevent computerized collection letters from being sent to cardholders who have written the company oca biling error and who are withholding payment pending resolution of the dispute. Respondent must forfeit the amount in dispute up to $50, should it fail to comply with the Fair Credit Biling Act' s biling error resolution procedures and maintain for at least two years, records evidencing compliance with the Act's provisions. Further, respondent must resolve billing errors involving foreign merchant 'within the lesser of 90 days or 2 complete billing cycles from the date of receiving a billing error notice. Appearances For the Commission: Ronald G. Issac, Jonathan D. Jerison and Arthur B. Patrizio.

For the respondent: Ronald J. Greene, Christopher R. Lipsett and Clifford B. Hendler, Wilmer, Cutler Pickering, Washington, D. COMPLAINT Pursuant to the provisions of the Federal Trade Commission Act as amended, and the Truth in Lending Act and the implementing regulation promulgated thereunder, and by virtue of the authority vested in it by said Acts, the Federal Trade Commission, having reason to believe that American Express Company, a corporation, hereinafter sometimes referred to as respondent, has violated the provisions of said Acts and the implementing regulation promulgated under the Truth in Lending Act, and it appearing to the Commission that a proceeding by it in respect thereof would be in the public interest, hereby issues its complaint stating its charges in that respect as follows:

For the purposes of this complaint, the terms billing error, card- Complaint 103 F.

holder, card issuer, credit card and proper written notification of a biling error shall be defined as these terms are defined in Regulation Z (12 CFR 226), the implementing regulation of the Truth in Lending Act (15 U. C. 1601 et seq,J, duly promulgated by the Board of Governors of the Federal Reserve System.! PARAGRAPH 1. Respondent American Express Company is a corporation organized, existing, and doing business under and by virtue of the laws of the State of New York, with its principal offce and place of business located at American Express Plaza, New York, New York. PAR. 2. For some time in the past before January 1, 1983, respondent had been engaged in the issuing of American Express Cards which could be used to charge the costs of travel and entertainment services and merchandise purchased from stores and other establishments that honor such Cards. Since January 1, 1983, such Cards have been issued by a wholly-owned subsidiary of respondent. PAR. 3. In the ordinary course of its business as aforesaid, respondent was a "card issuer." Thus, pursuant to Section 226.2(s) of Regulation Z, respondent was a "creditor" for purposes of Section 226. 14 of Regulation Z.

PAR. 4. In some instances, respondent's collection procedures provided for computer-generated collection letters to be sent automatically to cardholders whose accounts were delinquent. Upon receipt of proper written notification of a billing error from a cardholder who had withheld payment of a disputed amount, respondent instructed its computers to cease all collection activity for a specified period of time. In some instances, billing errors were not resolved within this specified period and respondent's employees failed to prevent the computer from resuming automated collection activity with respect to disputed amounts. As a result, in some instances respondent mailed or delivered or caused to be mailed or delivered to cardholders collection letters demanding payment of amounts alleged to be in error prior to resolving the dispute as required by Section 226. 14(a)(2) of Regulation Z.

PAR. 5. In some instances, after receiving proper written notification of a biling error concerning a transaction outside the United States between a cardholder and a foreign business entity that honors respondent's Card, respondent failed to resolve the billing error within the lesser of ninety (90) days or two (2) complete biling cycles from the date of receipt of proper written notification of a billing error, as required by Section 226.14(a)(2) of Regulation Z. PAR. 6. By and through the acts and practices alleged in Paragraphs 1 All referencp. to the Truth in Lending Act and Regulation Z contained in this complaint shah refer to the Trutl, in Lending Act as amended to March 23, 1976 and Regulation Z as amended to March 23 1977 r:H.1D.1UVr:H ...r.1 .1LDIJIJ V'-.

Decision and Order Four and Five, respondent forfeited the right to collect from the cardholder the amount indicated by the cardholder to be a billng error (whether or not such amount was in fact in error) and any finance charges, late payment charges, or other charges imposed thereon up to a maximum of $50 for each item or transaction indicated by the cardholder to be a biling error. In some ofthese instances, respondent failed to forfeit amounts that it should have legally forfeited, in violation of Section 226.14(0 of Regulation Z.

PAR. 7. In the ordinary course and conduct of its business, respondent retained certain correspondence and computerized, microfimed and other records relating to its handling of billng errors. In some instances before August 1981, respondent did not retain adequate evidence of compliance with Section 226.14 of Regulation Z for a period of two (2) years, as required by Section 226.6(i) of Regulation PAR. 8. Pursuant to Section 103(s) of the Truth in Lending Act respondent' s aforesaid failures to comply with the provisions ofRegulation Z constituted violations of that Act and, pursuant to Section 108 thereof, respondent has thereby violated the Federal Trade Commission Act.

DECISION AND ORDER The Federal Trade Commission having initiated an investigation of certain acts and practices of the respondent named in the caption hereof, and the respondent having been furnished thereafter with a copy ofa draft of complaint which the Bureau of Consumer Protection proposed to present to the Commission for its consideration and which, if issued by the Commission, would charge respondent with violation of the Truth in Lending Act and the implementing regulation promulgated thereunder and the Federal Trade Commission Act; and The respondent, its attorneys, and counsel for the Commission having thereafter executed an agreement containing a consent order, an admission by the respondent of all the jurisdictional facts set forth in the aforesaid draft of complaint, a statement that the signing of said agreement is for settlement purposes only and does not constitute an admission by respondent that the law has been violated as alleged in such complaint, and waivers and other provisions as required by the Commission s Rules; and The Commission having thereafter considered the matter and having determined that it had reason to believe that the respondent has violated the said Act, and that complaint should issue stating its charges in that respect, and having thereupon accepted the executed Decision and Order 103 F.TC. consent agreement and placed such agreement on the public record for a period of sixty (60) days, now in further conformity with the procedure prescribed in Section 2.34 of its Rules, the Commission hereby issues its complaint, makes the following jurisdictional findings and enters the following order:

1. Respondent American Express Company is a corporation organized, existing and doing business under and by virtue of the laws of the State of New York, with its offce and principal place of business located at American Express Plaza, in the City of New York, State of New York.

2. The Federal Trade Commission has jurisdiction of the subject matter of this proceeding and of the respondent, and the proceeding is in the public interest.

Orner For purposes of this Order, the terms billing error, billing-error notice, cardholder, consumer credit, credit card and state shall be defined as these terms are defined in Regulation Z (12 CFR 226), the implementing regulation of the Truth in Lending Act (15 UB.C. 1601 et seq.

It is ordered That respondent American Express Company, a corporation, its successors and assigns in any state, and its offcers, agents representatives and employees, directly or through any corporation subsidiary, division or other device in any state, in connection with any consumer credit transaction involving the use of any credit card issued by respondent to a resident of any state, do forthwith cease and desist from:

1. Failing, following respondent' s receipt of a billng-error notice from a cardholder who has withheld payment of a disputed amount to prevent respondent's computerized collection procedures from causing collection letters to be mailed to the cardholder to collect any portion of an amount indicated in the cardholder s notice as being a billing error (or any finance charge, late payment charge, or other charge computed on such disputed amount) prior to resolving the dispute, as required by Section 226.13(d)(I) of Regulation Z. 2. Failing, following respondent' s receipt of a billing-error notice from a cardholder concerning a transaction outside the United States between the cardholder and a foreign business entity that honors any credit card issued by respondent, to resolve the biling error within 1 All reference to the Truth in Lending Act and Regulation Z contained in this Order shall refer to the Truth in Lending Act as amended to March 31, 1980 and Reguation Z as amended to April 1 , 1981. n.n.l.L',.lu\Jn. .A.l. .l UU \JV.

Decision and Order the lesser of ninety (90) days or two (2) complete biling cycles from the date of receipt of the billing-error notice, as required by Section 226.13(c)(2) of Regulation Z.

3. Failng to establish procedures which wil require that, if correspondence is received from cardholders alleging, or reciting facts which on their face show, noncompliance with Sections 226.13(c) or (d)(l) of Regulation Z, such correspondence wil be forwarded to personnel with authority to take appropriate action to comply with the forfeiture provision of Section 161(e) of the Truth in Lending Act. 4. Failing to keep evidence of compliance with Section 226.13 of Regulation Z for a period of two (2) years, as required by Section 226.25(a) of Regulation Z.

Provided That respondent shall not be liable for a civil penalty for any violation of this Order if it shows by a preponderance of the evidence that the violation was not intentional and resulted from a bona fide error or mistake notwithstanding the maintenance ofprocedures reasonably adapted to avoid any such error or mistake. It is further ordered, That respondent distribute a copy ofthis Order to each of respondent' s present and future supervisory personnel who are responsible for operations relating to resolution of credit card billng errors, and that respondent secure a signed statement acknowledging receipt of a copy of this Order from each such person. It is further ordered That respondent notify the Commission at least thirty (30) days prior to any proposed change in the corporate respondent such as dissolution, assignment, or sale resulting in the emergence of a successor corporation, the creation or dissolution of subsidiaries, or any other changes in the corporation that may affect compliance obligations rising out of this Order. It is further ordered, That respondent herein shall, within ninety (90) days after service upon it ofthis Order, fie with the Commission a report, in writing, setting forth in detail the manner and form in which it has complied with this Order.

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Interlocutory Order 103 F.'r.