American Express will pay between $4 million and $6 million to settle claims that it increased consumers’ fixed-interest rates to a higher, variable rate without permission or notification, Law360 reported.
Under the settlement of the 2009 class-action lawsuit, which was disclosed Wednesday (Aug. 20), class members will receive either $32.50 or a proportionate share of the fund.
The lawsuit alleged that American Express violated the Truth in Lending Act and its contract with customers when it increased cardholders’ fixed 12.99 percent annual interest rate to a variable rate of at least 14 percent. American Express’s agreements had said its rate for cash advances could vary but promised a fixed rate for purchases, absent default, according to the complaint.
In the settlement motion on Wednesday, the plaintiffs admitted that because of a 2011 U.S. Supreme Court ruling in the case of AT&T Mobility LLC v. Concepcion, which strengthened arbitration clauses such as the one in American Express’s cardholder agreement, there was a serious risk in continuing the suit.
The motion also said plaintiffs expected American Express to argue it did not change the interest rates for years and it is unreasonable to expect credit card terms to stay unchanged forever.
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