When & Why Did Amex Decide That Manufactured Spending Was Against The Rules? - Running with Miles
Credit Cards Manufactured Spending

When & Why Did Amex Decide That Manufactured Spending Was Against The Rules?

Bluebird
Written by Charlie

A look back at when Amex may have decided that manufactured spending with Bluebird and Serve were going to be against the rules as well as some thoughts as to why.

Advertiser Disclosure

As I am sure you know by now, American Express axed a lot of Bluebird and Serve accounts for unusual activity in loading of the cards. Bad day for the generation of easy miles and points!

When & Why Did Amex Decide That Manufactured Spending Was Against The Rules?

Bluebird

 

In the letter they sent out, Amex referenced Section 22.d of their terms and agreement as to why they were eliminating the ability of these cardholders to add money. So, what does Section 22.d say? It says quite a bit, but I will put in bold part in here that is certainly the reason they shut us down:

We, in our sole discretion, may limit your use of, suspend or terminate your privileges with respect to, your Account, Family Account(s), SetAside Account, Walmart Buck$ balance and/or Card or any feature or benefit thereof, with or without cause or notice, other than any notice required by Applicable Law, including in the event we believe there has been a breach in security or there has been unauthorized activity involving your Account or you have engaged in activity that is fraudulent or inappropriate or that violates the terms of this Member Agreement. We reserve the right to suspend or close your Account (or Family Account(s), SetAside Account or Walmart Buck$ balance) if, among other reasons, (i) you neither Add Funds to nor use your Account, Family Account, SetAside Account and/or Card for extended periods, (ii) there are no funds remaining in your Account or Family Account or SetAside Account for extended periods, (iii) you attempt to Add Funds to your card from an Add Funds Source and are declined or dishonored repeatedly, (iv)you structure purchases or conduct transactions with your Account, Family Account, SetAside Account and/or Card to manufacture spend, (v) you withdraw your consent to deal with us electronically pursuant to the Consent Statement or (vi) for any other reason permitted by Applicable Law. We may, in our sole discretion, decide not to immediately exercise our rights pursuant to this paragraph, but such forbearance (whether once or repeatedly) shall not constitute a waiver nor shall it preclude our right to exercise our rights in the future.

There it is – straight and clear. It calls out manufactured spending directly as a reason that they can close accounts. To my knowledge (but granted, I don’t read all the terms of all the banks that closely!), this is the first time an issuer has used that term like we do. And they are against it.

So When Did This Change?

The last archived portion of the legal agreement I could find was from September 6, 2015 (here is the archive address if you would like to look around). That version of the agreement did not prohibit anything to do with the practice of manufactured spending. That agreement had last been modified at that point on August 19, 2015.

Here is the language from that date:

We, in our sole discretion, may limit your use of, suspend or terminate your privileges with respect to, your Account, Family Account(s), SetAside Account, Walmart Buck$ balance and/or Card or any feature or benefit thereof, with or without cause or notice, other than any notice required by Applicable Law, including in the event we believe there has been a breach in security or there has been unauthorized activity involving your Account or you have engaged in activity that violates the terms of this Member Agreement. We reserve the right to suspend or close your Account (or Family Account, SetAside Account or Walmart Buck$ balance) if, among other reasons, (i) you neither Add Funds to nor use your Account, Family Account, SetAside Account and/or Card for one year or more, (ii) there are no funds remaining in your Account or Family Account or SetAside Account for one year or more, (iii) you attempt to Add Funds to your card from an Add Funds Source and are declined or dishonored repeatedly, (iv) you withdraw your consent to deal with us electronically pursuant to the Consent Statement or (v) for any other reason permitted by Applicable Law. We may, in our sole discretion, decide not to immediately exercise our rights pursuant to this paragraph, but such forbearance (whether once or repeatedly) shall not constitute a waiver nor shall it preclude our right to exercise our rights in the future.

As you can see, they added the iv in there to mention the manufactured spending aspect of the account. So, back in September, they did not have a problem with it in a way they were interested in doing anything about it.

The current terms and agreement were put in place January 5, 2016. So, between September 6 and January 5, American Express must have done some analyzing and realized it was not in their best interest to continue to allow people to use their Bluebird & Serve cards to generate miles and points.

Why Did Amex Make This Change?

Little Transaction Revenue

Here is how it works with us for manufactured spending with Bluebird – I take my Chase Ink Plus and use it to buy gift cards at Office Max or Staples. For that convenience, the card assesses a fee of between $3.95 and $6.95. I then take that card and go to Walmart and use that as a debit card to load it onto my Bluebird. My cost here is $0. Then, I use the balance for a variety of things, but most of the time it is to pay a credit card or transfer to my bank account. American Express gets nothing.

Now, if we all had used those cards for purchases all the time, American Express would be getting a percentage for the sale and the use of the Amex card from the vendor. I would imagine the majority of us were not using our Bluebird balances for purchases, which means that American Express was not profiting from us.

Walmart Partnership

Another part is that analysts are saying that a small comeback by Walmart in 2016 could mean a bump in revenue for American Express with their Bluebird partnership. American Express has had a lot of tough times in 2015 – they need their remaining products to work. If there are more concerns about fraud with their prepaid products, they could stand to lose the confidence to have them exist long-term.

My guess and opinion is that it was likely a mixture of those two – no revenue from the MS crowd and the need for Bluebird to stay relevant in the hands of the customers that it was intended for.

Consent & Why Certain Accounts May Not Have Been Touched

Here is a thought as to why it has not affected everyone as of yet: Is it true that consent is provided to an updated set of terms if, after consent was initially given, the product is used again? If that is the case, then any use or logins to Bluebird or Serve after the modification date of January 5th would have initiated consent and may have been the trigger they needed to say those accounts violated it. As well, if someone who did not get the e-mail now logs in or tries to use their account, it may trigger them as well. Just a thought – feel free to weigh in on this as well.

Either way, it is gone for most of us now! I did think it would be interesting to look in and see when the change might have occurred. I like to try and figure out what may have happened when things like this occur – call it a coping mechanism! 🙂

Please feel free to leave any thoughts you may have on this or anywhere I might have got it wrong!

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About the author

Charlie

Charlie has been an avid traveler and runner for many years. He has run in marathons around the world for less than it would cost to travel to the next town - all as a result of collecting and using miles and points. Over the years, he has flown hundreds of thousands of miles and collected millions of miles and points.
Now he uses this experience and knowledge to help others through Running with Miles.

18 Comments

  • Here’s a theory that’s probably way off the mark: the ATM at my local Walmart says serviced by MetaBank, and one of the few remaining gift cards that were still loadable at the WalMart ATM came from MetaBank, such as the MetaBank Visa cards purchased at giftcards.com and at Staples. Was MetaBank losing money on these loads and did MetaBank require BlueBird to cancel the reload service to BlueBird cardholders that used the MetaBank-serviced ATM? (Of course, that theory doesn’t explain why American Express shut down many of the Serve accounts,which would not have used the MetaBank-servied ATM, so on its face it seems like this must be an inaccurate theory.)

  • Not that it matters, but no one has manufactured spending on their serve or bluebird. The MS happens with the credit card, so no, that is not the reason.

  • Hate to be the bearer of bad news but the Serve of mine that was shutdown hadn’t been touched online since Dec 14. The active one was loaded online last night.

  • For the record, they don’t need to give you a reason.

    “We, in our sole discretion, may limit your use of, suspend or terminate your privileges with respect to, your Account, Family Account(s), SetAside Account, Walmart Buck$ balance and/or Card or any feature or benefit thereof, with or without cause or notice”

    “With or without cause”. As in, any reason whatsoever.

    Also,
    “. We reserve the right to suspend or close your Account (or Family Account, SetAside Account or Walmart Buck$ balance) if, among other reasons,”

    And then it lists several, which now include MS.

    The fact that they changed their terms to include MS doesn’t really make much of a difference. They could’ve shut down your account anyways.

    • First, great post Charlie — was waiting for someone to do the dissection on the when & why the terms got changed.

      Second, to Fiby, “for the record,” yes, you may be right that they don’t need to give an explanation, but as they are a public company that at least likes to appear like they’re the good guys, (goes down with the faux news, cnbc, and fiscal times crowds) They mix in the nonsense about we were somehow engaged in nefarious activity, activity that had NOT been against their terms until 3 days before they slammed us all as bad actors.

      Third, I’m half tempted to craft a letter of my own terms to AMEX…. It will go along the lines of, “I reserve the right to take advantage of any good amex offer that might come along, even as I also reserve the right to criticize, to trash AMEX at any and every opportunity….” Count on it. My pen will long be mightier than your corporate arrogance. And no, I don’t have to give any reasons either.

  • Although the “why” is ultimately unimportant, it’s fun to speculate.

    Some suggest it might be backdoor pressure of banking regulations: http://frequentmiler.boardingarea.com/2016/01/08/amex-kills-bluebird-and-serve-for-manufactured-spend/comment-page-2/#comment-1511095

    A little tin-foily for my tastes, but food for thought.

    I’m more inclined to agree with your line of thought that those who were banned simply weren’t profitable to Amex, and after a down-year in 2015, the higher ups knew they needed to trim the fat ASAP.

    Their algorithm probably took into account several factors before the heavy-axe came down: age of account, usage of deposited funds (percentage used for actual spending vs billpay/bank withdrawal/etc) and whatever profitability factors they could come up with.

    Like you said, Amex made nothing off loads (both offline and onload), and thus those who weren’t using for actual spending became expendable. They probably took a long hard look at this and waited until AFTER the holiday shopping season/new years was over before implementing these changes.

    • That was my message you cite on Frequent Miler. I am still dead certain that all the sudden changes we are seeing in the MS world and money transfer world reflect pressure from the feds. Do not forget it was just a couple days earlier that serve served notice that effective IMMEDIATELY you could not withdraw money if you were outside the USA. That tells me that Uncle Sam is cracking down on funds going places that they cannot easily watch.

  • My final takeaways on all this:

    Sad day for MS, AXP looks like it might be a nice contrarian play, time to short Simon Property Group!

  • Speaking up here as a Target employee. When RedBIRD died, it was a huge boon for our cashier efficiency. I would say MSers were taking up 3-4 labor hours per day of cashier time with all the swiping/loading. (Some people would come with 5-10 RedBirds.) 3-4 labor hours… that’s $60 per day per store. Maybe my store was a little MS-heavy (Bay Area), but if you multiply $60 by 365 by 1,800 Target stores… that’s $40MM in costs that the product added. At Wal-Mart you’re dealing with an even less talented workforce… so they’re getting paid less but they might be taking up more time, not to mention the time policing people to show you whether the debit card has their name on it. So it’s an equally large chunk of change. If I were a Wal-Mart cashier though I’d be sad as swiping cards and typing in load amounts is more fun than bagging milk.

    • In my area, Redbird had to be loaded at customer service and Bluebird had to be loaded at Kate or customer service. Granted that it was a drain on CS, it didn’t affect regular cashiers.

    • How many EXTRA hours did Target have to pay for? My guess is none. Cashiers worked the same number of hours, they just had less slack time.

  • So, if I get the gist of targetman’s explanation, MS folk were creating more work and employing more people in America. Isn’t that what the economy needs? Especially now that oil and related industries are pink slipping folks right and left and the stock market is tanking? But does his company care about American jobs – noooo!

  • My husband’s Serve hasn’t been shut down yet, even though he used it solely for MS (loading SMGCs and then paying his CC bills). Can’t figure out why. Not sure what to do. Thinking about charging small charges on it for the next few months, a few loads from a bank account, and then maybe put a couple GCs on it in a few months and see what happens?

  • I’m a little late to this thread, but let me give y’all a different perspective. It costs money to run Serve/Bluebird. There is an investment for everything from running the website to printing the cards. Anti fraud is a big investment.

    Let’s say AmEx expects a 10% return on their investment. (Roughly correct) If AmEx spends $100M on BB/Serve, they darn well require $110M in gross revenue.

    Some of the MS jerks pretend they are only collecting points from Chase Ink, they aren’t costing AmEx anything. Wrong. Every Serve/BB account costs real money.

    Is this why AmEx just shut down the MS fraudsters? I don’t know, but the above calculation is why AmEx walked away from Costco.

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