Response by American Express about "Where You Shop" credit profiling

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Mogul of Pineapples
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Response by American Express about "Where You Shop" credit profiling

Postby Mogul of Pineapples » Thu Feb 05, 2009 12:56 am

Below I am copy/pasting an internal document from American Express regarding the recent development of profiling and determining credit based on where cardholders shop. (There are several recent threads on Credit Card Forum about it.) The contents of the document speak for themselves as to where Amex currently stands on this issue. I will not disclose where/who I obtained this from, but I can guarantee you it's 100% authentic. Again, remember this is an internal company document, not any official press release. I applaud American Express for quickly addressing and changing their policy on credit profiling based on where you shop.

Responsible Lending Actions
SDL/TL Talking Points to use in Team Huddles


Background:

- We recently made the decision to no longer use “where you shop” as a reason to reduce credit lines. It was never a determining factor by itself but it was confusing to Cardmembers because it was not about specific merchants and so we decided to stop using it.

- We want to tell our customer care professionals about this decision so they can answer Cardmember questions appropriately, but also, and more importantly, take this opportunity to speak with them to ensure they understand the bigger picture about AXP’s approach to responsible lending.

Action:

- Please call team huddles as soon as possible and you can use the talking points below to lead the discussions.

Profitability and Managing Risk

- Given the environment, I wanted to remind you of a few key facts about American Express, our priorities and our approach to responsible lending.

- I recognize that in your roles you are hearing directly from customers and empathize with their problems.

- I want to remind you that our aim is to prudently manage credit risk — for AXP and for our Cardmembers.

- We have a responsibility to run our operations effectively and to turn a profit.

- Ensuring large corporations, such as ours, are profitable and deemed trustworthy institutions is one of the keys to economic recovery.

- One way we accomplish this goal is to manage our risk prudently.

Credit Limit Decisions

- In reviewing Cardmembers’ credit lines, the driving factor is their overall debt level relative to their financial resources.

- Beyond that, no one factor determines our decision to reduce a credit limit. We look at many factors, including the Cardmember’s spending and repayment pattern with us, their reported income, and credit bureau data/scores.

- In fact, our risk models include hundreds of variables and we use the models for a variety of reasons, including detecting fraud and identity theft.

- Previously American Express had also used “where you shop” as a reason to reduce credit lines. It was never a determining factor by itself and it was confusing to Cardmembers because it was not about specific merchants and so we have decided to stop using it.

- Our aim in assigning credit limits is to strike the right balance between accommodating our Cardmembers’ spending needs and, at the same time, prudently managing credit risk — for us and for our Cardmembers.

- It’s also important to understand that the information we have — that helps us send relevant marketing offers, manage risk, detect fraud and identity theft, and more — is all a part of our closed loop system that includes both Cardmember and merchant data — a critical competitive advantage for AXP.

- Tracking and monitoring our closed loop data gives our Cardmembers and, in turn, our shareholders some important advantages. As examples, we are able to better track fraud (e.g. identifying excessive charges at same merchant in short period) and create tailored marketing offers.

Going Forward

- In addition to managing our risk, we must continue to run our company as efficiently as possible. We must all watch every dollar. We’ve done a good job but these continue to be challenging times.

- We'll continue to focus on our three priorities -- staying liquid, staying profitable and investing selectively for growth -- to manage the serious challenges we face in the short term and also position the company for the inevitable turnaround in the economy.

Next Steps

- We have new Q&As available in port about our decision to no longer use “where you shop” as a reason to reduce credit lines. Please make sure you refer to these if you receive any questions from Cardmembers.

- We also know the conversations you are having with Cardmembers are not always easy. It can be difficult to help a Cardmember understand the actions we may need to take on their account.

- I want to take this opportunity to thank you for your daily commitment to providing extraordinary customer care in this challenging environment.

- Please continue to let me know if there are certain questions or issues you are having difficulty addressing and we can see if we can provide you with better information.
Disclosure: I am a moderator/paid staff of this site, which does have advertising relationships with some credit cards that are discussed and linked to. Regardless, anything I say is my honest opinion.

Current Cards:
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jezzlin
 
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Postby jezzlin » Thu Feb 05, 2009 3:36 am

Funny I came across this forum for something else and happened to see this too. I saw this story about credit profiling by AMEX on Dateline, 20/20 or one of those shows only days ago and was very disturbed that they would do that. It's good to know they have stopped now.

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The Fuzz
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Postby The Fuzz » Thu Feb 05, 2009 11:50 am

I've read that same document before, so I can vouch for the authenticity. I have to say that I've been surprised how AMEX has been painted by the media for this. It wasn't just AMEX that made decisions based on this, but I guess everybody like to see the shining knight tarnish. It was never the only factor anyway, so people really don't need to worry about it. I don't even believe it was among the most persuasive reasons for denial of credit. The fact that people are allowing their debt to credit ratio to get out of control is one of the big reasons people are finding their lines cut. And what happens when your debt to credit ratio gets too high and then your credit lines get cut? Your debt to credit ratio gets even higher and starts a domino effect with your other creditors.

Anyway, it is good to see that AMEX is once again leading the industry in change. Hopefully we'll see statements come from other financial institutions that say similar things.

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Cucumber
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Postby Cucumber » Thu Feb 05, 2009 2:57 pm

Whew! For a minute there this made me think twice about using my Amex as my daily card. I'm glad to hear they've reversed this now.

FYI I think Chase and Citi does something similar like this (or did) but I haven't heard anything lately on whether or not they still do. Does anyone know :confused:
OBAMA
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magyar1045
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Postby magyar1045 » Thu Feb 05, 2009 7:11 pm

I guess all it takes is big time negative reports on TV and newspapers for mega outfits to change their ways.

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The Fuzz
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Postby The Fuzz » Thu Feb 05, 2009 7:27 pm

Technically this is something that went down before the news got hold of it. This decision was made before the Good Morning America thing. The verbiage for customer service just didn't go out until last week.

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Postby 1bootcamp » Fri Feb 06, 2009 3:09 pm

How long were they doing this? There have been threads on the forum about this for months now. Heck I remember hearing about credit cards doing this years ago too. I don't think profiling credit based on where you shop is anything new. It looks like what happened is Amex always used it and recently went a little overboard with using it lately and that is what got them in hot water. But as being a practice by card companies I think we have seen this around for a while now.

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The Fuzz
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Postby The Fuzz » Fri Feb 06, 2009 9:02 pm

I'm not sure how long they were doing it. It didn't become an issue until 2008 really. I started hearing about it in 2007, but it wasn't nearly as frequent of a reason as it was last year.

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Mogul of Pineapples
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Postby Mogul of Pineapples » Sat Feb 07, 2009 3:04 pm

Magyar didn't you just have problems with another issuer canceling your credit card based on where you shop?
Disclosure: I am a moderator/paid staff of this site, which does have advertising relationships with some credit cards that are discussed and linked to. Regardless, anything I say is my honest opinion.

Current Cards:
American Express: Blue Cash, Simply Cash Bank of America: WorldPoints Platinum Plus Chase: Amazon, British Airways, Cash Plus Rewards, Freedom, Ink Cash Citi: Thank You Premier, Dividend Platinum Select Discover: More
Primary Everyday Card: American Express Blue Cash
Primary Travel Card: Chase Sapphire Preferred

magyar1045
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Postby magyar1045 » Sat Feb 07, 2009 4:10 pm

They lowered my limit.



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