Detroit reaches new settlement with banks

BANKRUPTCY
Detroit, banks reachnew settlement

Detroit reached a new settlement in a bid to end interest-rate swap contracts with UBS and Bank of America, cutting the termination amount to about $165 million from $230 million.

The settlement was presented to a mediator, U.S. District Judge Gerald Rosen, in federal court in Detroit on Tuesday, according to a transcript. The agreement still requires bankruptcy court approval. The next hearing in the case is scheduled for Jan. 3.

“This is an important development for the city and its residents because it means we can start moving forward on implementing needed investments in public safety and services,” Kevyn Orr, Detroit’s emergency financial manager, said in a statement.

U.S. Bankruptcy Judge Steven Rhodes on Dec. 18 suspended a trial over the original settlement, under which the city would have paid UBS and Bank of America’s Merrill Lynch unit $230 million to terminate interest-rate swaps that have cost the city about $202 million since 2009.

To fund the settlement, the city sought to borrow $350 million and use the extra money for restructuring projects. The agreement would cut that loan to $285 million, including about $120 million to fund city improvements, according to the statement from Orr’s office.

— Bloomberg News

banking
American Expressto pay $75.7 million

American Express has agreed to pay at least $75.7 million to end an investigation into what regulators said was misleading marketing of some discontinued card products.

The Federal Deposit Insurance Corp. said American Express led consumers to believe that an account protection product would work for up to two years when the benefits usually lasted no more than three months, and it didn’t properly explain the enrollment process for a product intended to protect against identity theft. It said 85 percent of consumers who signed up didn’t complete the enrollment process, but they were billed anyway.

The agency also said the company misrepresented the terms of a “lost wallet” product that was offered to Spanish-speaking customers in Puerto Rico, and it did not provide written materials in Spanish.

The FDIC said the programs were marketed to customers between 2004 and 2012. It said American Express will pay restitution to 335,000 customers.

The New York-based company said it agreed to pay $16.2 million in fines and repay at least $59.5 million to customers.

American Express said it has set aside enough to cover most of the costs of the settlement with the FDIC, the Consumer Financial Protection Bureau and the Office of the Comptroller of the Currency. It has already made most of the payments to customers.

— Associated Press

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