Amex Slips On Its Optima Card
American Express has gotten in trouble again, only this time it has nothing to do with its brokerage unit. AmEx's latest problem has cropped up in its flagship unit, Travel Related Services. For the first time ever, TRS will post a quarterly loss, the result of a $265 million charge to account for 1,700 layoffs, office closings, and loan-loss reserves. The TRS loss will net out to $50 million to $75 million.
The culprit: AmEx's Optima credit card. "To be blunt, we learned the hard way that a recession is not the time to attempt to aggressively build a credit business with below-market interest rates," wrote AmEx President Harvey Golub in a letter to employees. To make matters worse, the company had to write off $24 million to cover debts wrongly classified as collectible. In the future, AmEx will scale back the Optima card and raise prices.
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