Big defeat for consumers, small victory for American Express

American Express has gotten smarter over the last two days –smart enough to know that it can make this negative attention subside by taking a few shrewd steps. Its crisis management team finally put on its thinking cap and realized the need to respond. Perhaps government officials, customers, stock holders, retailers, and top executives put pressure on the company to quash this public ridicule.  Maybe American Express saw a ripple in its card activity.

I expected the company’s response to be more cunning. The statements made in the New York Times were gawky at best and an exercise in public relations hearsay.  In brief, the company appeased upset retailers by saying there is no “blacklist” while adopting a new policy because the old one was “confusing to card members.” 

American Express, please do not insult our intelligence by saying we are confused; better yet, do not insult the collective intelligence of your multi-billion dollar company that crafted, as you may call it, this misguided statement.  It was crystal clear what you meant. It is blatant discrimination.  Besides, you already confirmed in a previous article that there is, in fact, a blacklist. You called it by a different name: a “property risk model”.  You refused to name companies in this article because the model “actually changes frequently”.  Your explanations have not been consistent at all. Stop hiding behind semantics.   

As part of its new strategy that uses weapons of mass deception, American Express has told media that it will change its policy even though the changes are still unclear and unverifiable.  Do you really expect the company to regulate itself if it doesn’t have to?  As a result of this “commendable” change of heart or slight of hand, the story quickly will lose its national luster and then be reduced to the ranting blogs of consumer activists.  Meanwhile, consumers will feel relatively safe again and begin using their cards like before.  Also, I increasingly will become the disgruntled consumer as I continue to call for real accountability.  Moreover, the credit lines of those affected by the gross misunderstanding will not be restored. Perhaps the reason for not restoring the lines will be other factors that are deemed acceptable or within the law.

American Express has accomplished its mission despite the customer uproar and elusive discrimination.  The end justifies the means.  Simply put, it ran out of capital and could not underwrite the untapped debt of many of its customers.  It quickly needed to jettison that debt.  The damage has been done already.  

So, everyone, please stop sending me laudatory e-mails claiming triumph.  One lady wrote in her e-mail, “What a victory!!!”  I am sorry, but there is no victory. In conclusion, this is just American Express telling us what we want to hear, but continuing to do what they have always done.   

Comments

[J.S.Smith]

AMEX lowered my credit limit November 2007, maybe one of the one's in the first wave of reductions.

I had a limit of $12k then they took it down to $10k. At the same time they removed my no-preset limit on my other AMEX and put a limit of $1k on it. I never paid late, and paid in full. I called and was told there was nothing they could do, that my spending behavior raised red flags to them. The rep on the phone was nice as could be and even seemed baffled by it, especially when she reviewed my history with them. She attempted to get a manager on the phone to reverse the decision but after she put me on hold for a bit she got back on and said he refused to speak to me and that his suggestion was to close both of my accounts. It was a week later I received the emfamous letter of my spending habits and establishments.
I was furious, but I didn't close my accounts, still have both 1.5 years later. I didn't want to give them any satisfaction. But I did change some automatic charges to my bank account and stopped using them altogether. I didn't want them making money off of me, but I did like the rewards program. It is the best of any card company.
Though, I just realized I fell into their trap. After time I kind of forgave them and started using them again recently, rewards are addictive. I think I will stop again now.
I feel sorry for AMEX that they are in such financial trouble that they have to take such extreme measures. I don't feel sorry for them in the way they are going about it...you don't bite the hand that feeds you. If I don't pay late and pay off frequently then leave me be and let me earn money for you!

[Terry]

I agree with Holly, CASH ONLY!!!!! DON'T USE YOUR AMERICAN EXPRESS CARDS!!!

[Kumar]

I would agree with Holly about CASH ONLY - one does need a credit card to make purchases over the internet or from catalogs. However, here is an idea - if the balance is paid off at the end of the month on a credit card using your cash - isn't that a win/win for the consumer - the credit card companies don't get to charge interest and the consumer builds a credit history.

[Holly]

Marc....don't close the account, it will hurt your score and don't get it to a zero balance or the account will say "closed by creditor", which is worse!!

I agree with the CASH ONLY post. That used to be my policy, however, seems like to rent a car, hotel, purchase anything over the phone...you need a credit card.

[Marc]

I echo everyones' frustrations with AMEX...I too have been a victim of AMEX lowering my credit limit despite paying my card balance in full every month. In my case, i've purchased 2 computers over the past 6 months...everytime I purchased a computer, they lowered my credit limit. Could it be my PC purchases or the dollar amount...who knows but apparently AMEX does not care if you've been a loyal customer or not who pays their bills on time. I've decided to not use my AMEX card personally and taken out of my wallet...I'm debating to close the account or not but then again it my affect my credit score negatively by closing, so any suggestions out there?

[Peridot]

Kevin: You are an American Soldier for the Consumer. Thank you.

Let's hope this happens: consumers STOP using their credit cards. They stop using them at Wal-Mart, Kohl's, Applebee's, and EVERYWHERE. We STOP supporting the credit card companies who charge OUTRAGEOUS amounts of money to retailers and business owners for the "privilege" of allowing consumers to use credit cards for purchases.

COME ON AMERICA - let' start paying CASH for everything we possibly can. This is one way we can get revenge on the credit card companies. If we don't use our credit cards for purchases, then our local businesses and retail shops will not have to pay the credit card companies those outrageous bank charges they are required to pay, just to be able to "accept" credit cards.

CASH ONLY! Let's make this a motto for 2009! CASH ONLY. Can you imagine how successful such a movement would be if there is enough OUTRAGE from the consumer? Get the word out: CASH ONLY. Pay cash to your local businesses and retailers. CASH ONLY AMERICA. We can get out of this if we band together. CASH ONLY.

[Kevin D. Johnson]

Great point, Bob. That statement would have saved them a whole lot of negative press and perhaps millions of dollars. They just didn't have it in them. That is Crisis Management 101.

[Bob]

"Simply put, it ran out of capital and could not underwrite the untapped debt of many of its customers. It quickly needed to jettison that debt."

I wondered when somebody else was going to twig to this, and remark on it in public.

AMEX borrows money and then lends it to consumers, and is no longer able to borrow as much money as before. It *could* have sent out letters saying, "Due to the global financial crisis, we have had to institute changes in our financing model, and therefore are lowering credit limits for selected customers such as yourself. As the financial crisis eases, we expect to return your credit limit to its previous level."

But that would have taken some guts, some ability and willingness to face up to the inevitable (and probably unfair) sniping that AMEX is a credit-unworthy deadbeat corporation run by the same kinds of bozos who drove Wall Street into the gutter.

So instead, they send out letters blaming their CUSTOMERS for being deadbeats.

Way to go, AMEX! I'll bet Robert Townsend is rolling in his grave.

[Former 12 Year Platinum Amex Cardholder]

I'm a small business owner and work in the credit industry, so I understand how much it hurt my credit score when I closed my Amex. Unfortunately, Amex decided to change the rules on me as well- based on my spending pattern. I had a 35K limit, but was only allowed to utilize 3K per week. I have always paid off in full each month, so do the math- I might as well have a 12-15K credit limit.

In October 2008 I spoke with 2 supervisors before closing my account, neither one could give me a valid explanation of why this changed. I have other credit cards with similar credit limits, etc.. and have had no problems.

Good luck AMEX, I was so sorry to see you post a loss!

[cee]

What really infuriates me is not so much the lowering of the credit limit, but the power AMEX has on our overall FICO score. As we all know our credit score is greatly based on the percentage of available credit to debt. The larger the credit limit and smaller the debt, the higher our credit score, but when credit card companies such as AMEX constantly and mysteriously switch their methodology to asses one's credit worthiness and risk without tell their customers how they measure our "worth" then it ruins our financial portfolios/scores. There needs to be a more transparent standard in which all credit card companies base their customer's credit. For example, 60-65% our credit with a particular cc company should be based on our actual relationship with that company. So, if I've never been delinquent, paid three times the minimum or paid in full for at least 2 yrs., basically been an excellent customer, then limits should incrementally increase or stay the same but never decrease thus lowering my FICO score.

[AmexPlatinum Member]

Wonderful site!

It's too bad the financial industry has decided to hit customers below the belt, after the bell rang no less. Fortunately sites like yours are giving consumers a quick course in financial "groin" protection and self defense.

Keep up the good work!