Thursday, November 27, 2008

AMEX is biting the hand that feeds it

I have been a loyal American Express cardmember for 10 years. I started with a Delta Skymiles Silver and over the years upgraded to the Delta Reserve with an annual fee of $450 dollars.

When I started my business I opened two more accounts. They were there to help purchase equipment & fund projects. In return, we became loyal customers, always insisting on using AMEX for purchases despite the higher fees and slightly higher interest rates. In some instances, we refused to do business with vendors that did not accept American Express.

We built up a credit line of 100k. We collectively ran over $250k in charges through our cards. They gave us MQM's. We never missed a payment...ever.

It became one of those rare relationships in corporate America. Similar to the faithful and devoted customers of Apple. They actually built loyalty with us. They became our primary lender and our friend. They would even send us gifts at Christmas...We trusted them.

That's why it hurt so bad when they threw us under the bus. In the course of 14 days, without notice, they revoked 95% of our available credit, about $70k in total.

I called them assuming there must have been a mistake. I thought they might want to look at the facts. Things like:

-We've never missed a payment on any account...ever.
-Our FICO score was 735 and improving
-We paid down our balances by 50%
-Our credit utilization ratio was under 35%
-Our cash position was sufficient to support our debt load

The bottom line is they were not interested in facts. Hours on the phone with customer service and the executive office led to nowhere. We were not given the opportunity to appeal the decision or "opt out" of the changes in the terms of our agreement. The reason given for the reduced credit line changed depending on the day and who you talked to.

I mentioned to American Express that taking away all of our available credit would start the snowball effect, making us look like we're maxed out and killing our FICO score. With a lower score, we would then be put into a higher risk category, putting us in jeopardy of universal default with other lenders. They could care less.

After doing some research, I discovered that I was not alone. AMEX is hitting millions of credit worthy cardmembers with 700+ credit scores. They don't seem to care about the adverse effects their reductions are having. Small business that rely on OPEN are filing Chapter 11. Creditworthy borrowers are having their scores trashed.

They should be using a scalpel instead of an ax.

At the same time they are doing this, they are also asking for billions from the government under the TARP program. The treasury made a special exception and gave them bank status so they can have access to the funds. I wonder if the anyone in government knows what they are doing? Wasn't the $700,000,000,000 bailout designed to increase borrowing?

What AMEX is doing to creditworthy borrowers is borderline criminal. If it's not illegal yet, it should be. I smell one big class action lawsuit on the horizon.

I am not a credit law expert, but here's why I think they treading on very thin ice:

1. Credit Discrimination. They are using a new secretive proprietary risk model to determine credit risk, outside of FICO. It could be the zip code you live in, it could be a purchase you made, it could be your mortgage holder. The problem is the consumer has no access to this information to challenge its accuracy. What if there is a mistake? At least with the credit bureaus you can view and challenge items on your report.

2. They are changing the terms of your agreement and not giving you the opportunity to "opt out" of those changes.

3. They do not have an appeal process in place to challenge these reductions.

4. Their actions are directly pushing creditworthy over the edge, compounding the credit crisis.

If you have a good credit history and AMEX has reduced your line you are pretty much screwed for now. But there are a few simple things you can do to help the situation.

What you can do:

1. File a complaint with the OCC. American Express is an official bank now. Take advantage of that and file a complaint with the OCC, they are required to investigate. If enough people lodge complaints, somebody in government will notice. Credit discrimination is against the law.

2. Call or write the Inspector General of the Treasury. They are overseeing the TARP bailout. While American Express has their hand out for money, let the treasury know what they are doing.

Phone: (202) 622-1090
Fax: (202) 622-2151

Office of Inspector General
1500 Pennsylvania Avenue, N.W.
Room 4436,
Washington, DC 20220

3. Call your congressman. Ask to speak to a legislative aid. Tell them what AMEX did to you. Every time a call is made to a member of congress the call is tracked in a computer system. When enough calls are received about a particular item, the congressman is notified, the more calls, the more action. This process is very effective. They are your elected officials. They will listen. Type in your zip code and find your rep at

If anyone is aware of a law firm that is preparing a class action lawsuit related to this matter, please email me. Otherwise, as soon as I find an attorney to take the case, I will post the information here.