Consumer complaint received 2023-07-13
Company: AMERICAN EXPRESS COMPANY
State: PA
Product: Credit card or prepaid card
Sub-product: General-purpose credit card or charge card
Issue: Problem when making payments
Sub-issue: You never received your bill or did not know a payment was due

Complaint:
I applied for an American Express Platinum Card on XX/XX/XXXX, for one after I was approved it said the card did not have a spending limit. But after about two weeks my spending limit was lowered to {$35.00} " until '' I made a payment. I called American Express and asked them why my purchases were being declined they informed me I was at the alleged spending limit. They told me I could log in to check my spending tool on their virtual app. However, I got an error message when I tried to create an account. 

I called American Express and explained this matter to the customer service rep, he got really nasty with me. Basically telling me to log in to view my bill. Then I asked him about how they extend credit When banks can not loan money. The rep got very hostile saying, they loaned me the money. I informed the rep I would like paper statements. I receive the billing statement, however, I still wasn't able to log in to the portal to pay my bill and I'm still unable till this day. To me, I felt like this was purposely happening so they could ruin my credit and possibly get extra money from me for interest fees. 

All of this lead me to do some research about how loans work and to my surprise, I feel like I have been defrauded by American Express and I do not feel like they acted in good faith. I would like to share what I found. 


GENERALLY ACCEPTED ACCOUNTING PRINCIPLES 3. Banks are required to adhere to Generally Accepted Accounting Principles ( GAAP ). 
GAAP follows an accounting convention that lies at the heart of the double-entry bookkeeping system called the Matching Principle. This principle works as follows : When a bank accepts bullion, coin, currency, checks, drafts, promissory notes, or any other similar instruments ( hereinafter instruments ) from customers and deposits or records the instruments as assets, it must record offsetting liabilities that match the assets that it accepted from customers. The liabilities represent the amounts that the bank owes the customers, and funds accepted from customers. In a fractional reserve banking system like the United States banking system. It is important to note that the banks generate the majority of funds lent to borrowers, which are classified as assets of the banks. This is in contrast to the belief that these funds are simply transferred from one group of depositors to another group of borrowers.

RELEVANCE OF SUBTLE DISTINCTIONS ABOUT TYPES OF MONEY 4.Through thorough research and analysis of historical and economic writings, it has become apparent that there exists a widespread misconception about the nature of money within the US monetary and banking systems, particularly since the 1930s. As per classical economic theory, there are two distinct types of money that emerge once economic exchange moves beyond the bartering stage : money of exchange and money of account.. For nearly 300 years in both XXXX  and the United States , confusion about the distinctiveness of these two concepts has led to persistent attempts to treat money of account as the equivalent of money of exchange. In reality, especially in a fractional reserve banking system, a comparatively small amount of money of exchange ( e.g., gold, silver, and official currency notes ) may support a vastly larger quantity of business transactions denominated in money of account. The sum of these transactions is the sum of credit extensions in the economy. With the exception of customary stores of value like gold and silver, the monetary base of the economy largely consists of credit instruments. Against this background, I conclude that the Note, despite some language about lawful money explained below, clearly contemplates both disbursement of funds and eventual repayment or settlement in money of account ( that is, money of exchange would be welcome but is not required to repay or settle the Note ).

The factual basis of this conclusion is the reference in the Disbursement Request and Authorization to the repayment of {$4500.00} to American Express from the proceeds of the Note. Also, there is no reason to believe that American Express would refuse a substitution of the credit of another bank or banker as complete payment of my repayment obligation under the Note. This is a case about exchanges of money of account ( credit ), not about exchanges of money of exchange ( lawful money or even legal tender ).

5. Ironically, the Note explicitly refers to repayment in lawful money of the United States of America ( see Promise to Pay clause ). Traditionally and legally, Congress defines the phrase lawful money for the United States. Lawful money was the form of money of exchange that the federal government ( or any state ) could be required by statute to receive in payment of taxes or other debts. Traditionally, as defined by Congress, lawful money only included gold, silver, and currency notes redeemable for gold or silver on demand. In a banking law context, lawful money was only those forms of money of exchange ( the forms just mentioned, plus U.S. bonds and notes redeemable for gold ) that constituted the reserves of a national bank prior to 1913 ( date of creation of the Federal Reserve Banks ).

See, Lawful Money, Websters New International Dictionary ( 2d ed. 1950 ).

In light of these facts, I conclude that America Express and I exchanged reciprocal credits involving money of account and not the money of exchange ; no lawful money was or probably ever would be disbursed by either side in the covered transactions. The conclusion drawn is unequivocally supported by the bookkeeping entries that serve as the unassailable foundation for the disputed loan account. It is utterly perplexing that American Express would employ a dated phrase like " lawful money of the United States of America '' in their otherwise modern Note. This phrase may simply be a remnant from a bygone era before 1933. In contemporary credit agreements, repayment language like " The obligation to repay under this agreement will persist until payment is received in full and finally collected funds '' is used to sidestep the issue of what form of payment the obligation should take.

6. Legal tender, a related concept but one that is economically inferior to lawful money because it allows payment in instruments that can not be redeemed for gold or silver on demand, has been the form of money of exchange commonly used in the United States since 1933, when domestic private gold transactions were suspended ( until 1974 ) .. Basically, legal tender is whatever the government says it is. The most a common form of legal tender today is Federal Reserve notes, which by law can not be redeemed for gold since 1934 or, since 1964, for silver. See, 31 U.S.C. Sections 5103, 5118 ( b ), and 5119 ( a ).

Note : I question the statement that fed reserve notes can not be redeemed for silver since 1964. It was Johnson who declared on 15 March 1967 that after 15 June 1967 that Fed Res Notes would not be exchanged for silver and the practice did stop on 15 June 1967 not 1964. I believe this to be an error in the text of the authors affidavit.

7. Legal tender under the Uniform Commercial Code ( U.C.C. ), Section 1-201 ( 24 ) ( Official Comment ), is a concept that sometimes surfaces in cases of this nature. The referenced Official Comment notes that the definition of money is not limited to legal tender under the U.C.C. Money is defined in Section 1-201 ( 24 ) as a medium of exchange authorized or adopted by a domestic or foreign government and includes a monetary unit of account established by an intergovernmental organization or by agreement between two or more nations. The relevant Official Comment states that The test adopted is that of sanction of government, whether by authorization before issue or adoption afterward, which recognizes the circulating medium as a part of the official currency of that government. The narrow view that money is limited to legal tender is rejected. Thus, I conclude that the U.C.C. tends to validate the classical theoretical view of money.

HOW BANKS BEGAN TO LEND THEIR OWN CREDIT INSTEAD OF REAL MONEY 8. Based on my opinion, the most reliable sources for gaining insights into the history and application of credit as currency are XXXX XXXX XXXX renowned publication " MONEY, CREDIT & COMMERCE '' ( published in 1929 ) and Charles P. Kindleberger 's acclaimed " A FINANCIAL HISTORY OF XXXX XXXX  '' ( published in 1984 ). Through a comprehensive analysis of these sources and their relevance to the present scenario, we can confidently infer that commercial banks and private bankers ( referred to as discount houses ) in XXXX  and XXXX XXXX initiated lending money to borrowers primarily through the extension of credit to them or to third parties, using drafts or bills of exchange as the customary mode of credit expansion. These drafts and bills essentially constituted claims on the credit of the drawers, rather than actual disbursements of money in the form of bullion, coin, or other currency, and were commonly employed in transactions with third parties.

The third parties had to determine for themselves whether such credit money had value and, if so, how much. The Federal Reserve Act of 1913 was drafted with this model of the commercial economy in mind and provided at least two mechanisms ( the discount window and the open-market trading desk ) by which certain types of bankers credits could be exchanged for Federal Reserve credits , which in turn could be withdrawn in lawful money. Credit at the Federal Reserve eventually became the principal form of monetary reserves of the commercial banking system, especially after the suspension of domestic transactions in gold in 1933. Thus, credit money is not alien to the current official monetary system ; it is just rarely used as a device for the creation of Federal Reserve credit that, in turn, in the form of either Federal Reserve notes or banks deposits at Federal Reserve Banks, function as money in the current monetary system.

The Federal Reserve has the power to expand the money supply by adjusting banks ' reserve requirements, which are currently set at around ten percent of demand liabilities. This action compels banks to lend money to borrowers, thus creating credit money. Moreover, non-bank providers of credit, like credit card companies, can extend credit to customers without setting aside reserves, which also leads to an increase in credit money. The information presented in paragraphs 11 and beyond supports this explanation of how bank credit has emerged as a form of money.

XXXXXXXX XXXX XXXX XXXX  AS THE EQUIVALENT OF MONEY 9. Plaintiff apparently asserts that the Defendants signed a promise to pay, such as a note ( s ) or credit application ( collectively, the Note ), in exchange for the Plaintiffs advance of funds, credit, or some type of money to or on behalf of Defendant.

However, the bookkeeping entries required by application of GAAP and the Federal Reserves own writings should trigger close scrutiny of Plaintiffs apparent assertions that it lent its funds, credit, or money to or on behalf of Defendants, thereby causing them to owe the Plaintiff {$400000.00}. According to the bookkeeping entries shown or otherwise described to me and application of GAAP, the Defendants allegedly were to tender some form of money ( lawful money of the United States of America is the type of money explicitly called for in the Note ), securities or other capital equivalent to money, funds, credit, or something else of value in exchange ( money of exchange, loosely defined ), collectively referred to herein as money, to repay what the Plaintiff claims was the money lent to the Defendants. It is not an unreasonable argument to state that Plaintiff apparently changed the economic substance of the transaction from that contemplated in the credit application form, agreement, note ( s ), or other similar instrument ( s ) that the Defendants executed, thereby changing the costs and risks to the Defendants. At most, the Plaintiff extended its own credit ( money of account ), but the Defendants were required to repay in money ( money of exchange, and lawful money at that ), which creates at least the inference of inequality of obligations on the two sides of the transaction ( money, including lawful money, is to be exchanged for bank credit ).

MODERN AUTHORITIES ON MONEY 11. To understand what occurred between American Express and I concerning the alleged loan of money or, more accurately, credit, it is helpful to review a modern Federal Reserve description of a banks lending process. See, David H. Friedman, MONEY AND BANKING ( 4th ed. 1984 ) ( apparently already introduced into this case ) : The commercial bank lending process is similar to that of thrift in that the receipt of cash from depositors increases both its assets and its deposit liabilities, which enables it to make additional loans and investments.... When a commercial the bank makes a business loan, it accepts as an asset the borrowers debt obligation ( the promise to repay ) and creates a liability on its books in the form of a demand deposit in the amount of the loan. ( Consumer loans are funded similarly. ) Therefore, the banks original bookkeeping entry should show an increase in the amount of the asset credited on the asset side of its books and a corresponding increase equal to the value of the asset on the liability side of its books. This would show that the bank received the customers signed promise to repay as an asset, thus monetizing the customers signature and creating on its books a liability in the form of a demand deposit or other demand liability of the bank. The bank then usually would hold this demand deposit in a transaction account on behalf of the customer.

Instead of the bank lending its money or other assets to the customer, as the customer reasonably might believe from the face of the Note, the bank created funds for the customers transaction account without the customers permission, authorization, or knowledge and delivered the credit on its own books representing those funds to the customer, meanwhile alleging that the bank lent the customer money. If Plaintiffs response to this line of argument is to the effect that it acknowledges that it lent credit or issued credit instead of money, one might refer to Thomas P. Fitch, BARRONS BUSINESS GUIDE DICTIONARY OF BANKING TERMS, Credit banking, 3.

Bookkeeping entry representing a deposit of funds into an account. But American Express 's loan agreement apparently avoids claiming that the bank actually lent me money. They apparently state in the agreement that I am obligated to repay the principal and interest for the Valuable consideration ( money ) the bank gave the customer ( borrower ). The loan agreement and Note apparently still delete any reference to the banks receipt of actual cash value from me and exchange of that receipt for actual cash value that American Express returned.

12. According to the Federal Reserve Bank of New York, money is anything that has a value that banks and people accept as money ; money does not have to be issued by the government. For example, David H. Friedman, I BET YOU THOUGHT....

9, Federal Reserve Bank of New York ( 4th ed. 1984 ) ( apparently already introduced into this case ), explains that banks create new money by depositing IOUs, promissory notes, offset by bank liabilities called checking account balances. Page 5 says, Money doesnt have to be intrinsically valuable, be issued by the government, or be in any special form....

13. The publication, Anne Marie L. Gonczy, MODERN MONEY MECHANICS 7-33, Federal Reserve Bank of Chicago ( rev. ed. June 1992 ) ( apparently already introduced into this case ), contains standard bookkeeping entries demonstrating that money ordinarily is recorded as a bank asset, while a bank liability is evidence of money that a bank owes. The bookkeeping entries tend to prove that banks accept cash, checks, drafts, and promissory notes/credit agreements ( assets ) as money deposited to create credit or checkbook money that are bank liabilities, which shows that, absent any right of setoff, banks owe money to persons who deposit money. Cash ( money of exchange ) is money, and credit or promissory notes ( money of account ) become money when banks deposit promissory notes with the intent of treating them like deposits of cash. See, 12 U.S.C. Section 1813 ( l ) ( 1 ) ( definition of deposit under Federal Deposit Insurance Act ). American Express acts in the capacity of a lending or banking institution, and the newly issued credit or money is similar or equivalent to a promissory note, which may be treated as a deposit of money when received by the lending bank. Federal Reserve Bank of Dallas publication MONEY AND BANKING, page 11, explains that when banks grant loans, they create new money.

The new money is created because a new loan becomes a deposit, just like a paycheck does. MODERN MONEY MECHANICS, page 6, says, What they [ banks ] do when they make loans is to accept promissory notes in exchange for credits to the borrowers transaction accounts. The next sentence on the same page explains that the banks assets and liabilities increase by the amount of the loans.

COMMENTARY AND SUMMARY OF ARGUMENT 14. American Express apparently accepted my Note and credit application ( money of account ) in exchange for its own credit ( also money of account ) and deposited that credit into an account with my name on the account, as well as apparently issuing its own credit for {$4500.00} to American Express for my account. One reasonably might argue that American Express recorded the Note or credit application as a loan ( money of account ) from me to the them, then became the borrower of an equivalent amount of money from my account.

American Express in fact never lent any of its own pre-existing money, credit, or assets as consideration to purchase the Note or credit agreement from myself. ( Robertson Notes : I add that when the bank does the forgoing, then in that event, there is an utter failure of consideration for the loan contract. ) When American Express deposited my {$4500.00} of newly issued credit into an account, the Plaintiff created from {$4500.00} to {$5000.00} of new money ( the nominal principal amount less up to ten percent or {$4500.00} of reserves that the Federal Reserve would require against a demand deposit of this size ). The Plaintiff received {$4500.00} of credit or money of account from the Defendants as an asset. GAAP ordinarily would require that the Plaintiff record a liability account, crediting the Defendants deposit account, showing that the Plaintiff owes {$4500.00} of money to the Defendants, just as if the Defendants were to deposit cash or a payroll check into their account.

It's unclear if Plaintiff loaned their own money or assets to Defendants. Plaintiff recorded a {$4500.00} loan from the Defendants, which may have been their deposit. When Plaintiff repaid them using their own credit, the transaction was complete. There's a dispute over whether Plaintiff disclosed all the material facts in the credit application or Note. It's not clear if Plaintiff suffered any financial loss or damages. The " lawful money '' language in the repayment clause is confusing. I believe my Affidavit is true.

Company response to consumer: Closed with explanation