Amex ratchets up their war on gaming with wave of shutdowns

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Last week, Reddit was aflame with reports of Amex shutting down accounts.  While account shutdowns have long been common with other issuers, this hasn’t been Amex’s primary approach in the past.  For many years, they temporarily froze accounts in order to put them through financial review.  If the cardholder came out of the financial review successfully, their accounts were fully restored.  More recently, we’ve seen Amex clawing back points that they decided were earned through “gaming”.  Now, Amex has taken enforcement to the next level with complete account shutdowns.  Fortunately, they’ve allowed those shut down to transfer out their Membership Rewards points by calling in.

Who was targeted?

TNSepta, on Reddit, has done an amazing job in collecting and analyzing data from those who were shutdown and those who were not.  To-date, TNSepta’s analysis suggests that those targeted for shutdown were likely to have either or both of these risk factors:

  • Self refer (e.g. did they earn points by referring themselves to a new Amex credit card?)
  • Multiple of same card (e.g. do they have more than one of the exact same Amex credit card?)

In reading through the shutdown thread (found here), it looks to me like some of those who were shutdown but didn’t self refer reported that they had played “two player mode” by doing multiple spouse referrals.  I don’t take this as evidence that this is a risk factor, but it’s something to keep in mind.

What else do we know?

A comment on Doctor of Credit’s post about Amex shutdowns grabbed my attention.  While I don’t have proof that this is legitimate, I find it convincing.  This is from someone with the handle RAT Poison (FYI: “RAT” is the Amex Rewards Abuse Team):

I won’t say why or how, but I have insider info from RAT on what’s behind all this. This shutdown is part of a series of upcoming shutdowns. This week’s was a beta test for a new machine learning model specifically designed to target churning activity through unsupervised learning. Amex data scientists are improving an evolving neural network model that identifies churning behavior as it happens, and then assigns risk scores that factor in to anti bust-out or fraud scores. They’re treated the same, those all have different scores but their values affect your overall risk/reward score for Amex. If that overall score reaches a certain threshold (which they’re still experimenting with what exactly it will be), you will get shut down. What they’re doing is based on the same ML models that are used at Amex for AML and fraud prevention. The shutdowns will happen in small waves because one giant hit would be a massive drain on resources and disruption to their overall business, including drawing negative public attention outside of the churning community. That would scare people who are profitable but think they’re winning. They are also incrementing shutdown waves because of the resource usage it takes to identify accounts and assign a score based on the new indicated risk factors. When shutdowns are triggered, they begin combing through the new dataset. Right now, the model only looks back two years.

The clawbacks on self-referrals were a pilot program to this week’s events, not an entirety separate event. The same model that identified self-referrers was used for these shutdowns.

I’ll report back when I hear more info.

RAT Poison adds:

Also, I should add that if you had self-referrals clawed back, you’re already in the main data set. Those who were hit by the clawback were flagged as the highest priority for the model to comb through because of the strong correlation to proven churning/gaming behavior. Self-referrals were like a litmus test for who will be the low-hanging fruit for them to cut. As they tune the model to identify more positive activity correlations with churning, it will get more specific. Combing through level 3 data will become more prevalent in identifying churners, especially true if you have transactions from GCM and other obvious sites in your transaction history. If you were hit in the clawback but weren’t shut down this time, be cautious that you’re in their crosshairs. From what I’ve learned about the model, the inferred course of action here to avoid a shutdown is to not do anything with Amex except organic spend on your existing cards. Don’t carry a balance, no more MS, and no new cards. Keep in mind that the anti-churning model is fundamentally based on the neural architecture of their anti-fraud model.

PS I’ve read many comments loosly speculating about what RAT is. RAT isn’t a bunch of guys in India who are manually combing through the accounts with high MR balances, or checking referral sources for validity, etc.. This isn’t true. “RAT” is two data science and machine learning engineers in Phoenix who transitioned from the Amex fraud prevention team. There are two other engineers who have shared responsibilities with RAT and other anti-fraud teams.

And RAT Poison says that the Hilton Aspire no-fee link was unrelated:

The Hilton Aspire no AF link had absolutely nothing to do with these shutdowns. It’s a pure coincidence. The portfolio of recommended accounts to be shut down was sent off for approval more than a week ago. RAT doesn’t shut down accounts. They provide tranches of customer accounts suspected of abuse – along with correlating data. Those tranches go to evaluation from non-engineering management; who are the decision makers on shutting down a tranch of accounts or enacting other penalties. This is new to them and it’s somewhat uncharted territory, the speculations on here and on Reddit that they’re winging it are accurate. Their plan is to cut losses and effectively disable Amex churning first, then deal with the fallout afterwards. They’re legally within their rights so shutdown approvals are not made on a legal basis.

Summary of RAT Poison’s comments

Here’s my summary of the above:

  • The RAT team is using a machine learning model designed to identify gaming behavior
  • This first set of shutdowns was a pilot program.
  • Expect to see more shutdowns come in waves
  • If you had self-referrals clawed back you are already a person of interest
  • The model currently only looks back 2 years (so if you did lots of “gaming” more than 2 years ago, that shouldn’t affect you now)
  • Soon they will enhance the models to inspect level 3 data (e.g. the individual items you purchased, not just the store and overall purchase amount).
  • Beware of purchases made with obvious gift card sellers like Gift Card Mall or GiftCards.com.

And RAT Poison suggests that if you are likely to be a person of interest to them, you may be able to avoid getting shut down by doing the following:

  • Use your Amex cards only for organic spend.  Do not manufacture spend.
  • Don’t carry a balance
  • Don’t sign up for new Amex cards

A summary of risky behavior

Based on the data collected through Reddit, along with the comments from RAT Poison, we can conclude that the following behaviors may get you flagged by Amex for potential shutdown:

  • Referring yourself to new Amex credit cards
  • Holding multiple of the same Amex credit cards
  • Buying gift cards from obvious gift card sellers like Gift Card Mall and GiftCards.com
  • Future: Buying gift cards from stores that supply level 3 data to Amex

What should you do?

If you find that you’ve been shut down: Call Amex immediately to use up your Membership Rewards points.  If you have the Schwab Platinum card, you should be able to cash out your points for 1.25 cents each.  Alternatively, transfer points to an airline partner.  You can find a list of Amex transfer partners, including notes about each one, and a list of current transfer bonuses, by clicking here.

If you have previously had points clawed back due to self-referring: Consider transferring out your Membership Rewards points now, especially if there’s a transfer bonus that appeals to you.  It may be too late to avoid shut downs, but it might help to avoid all “gaming” activity on your Amex cards.

If you have self-referred in the past, but didn’t have points clawed back: It seems likely that you can avoid a shut down by avoiding all “gaming” behavior going forward.

If you have multiple of the same exact Amex cards: It seems likely that you can avoid a shut down by avoiding all “gaming” behavior going forward.

Others: Avoid obvious “gaming” behavior

How to avoid “gaming” behavior

To stay off of Amex’s radar for shut downs, these steps may help:

  • Do not refer yourself for new Amex cards.
    • Extra cautious: Do not refer family members in the same household and do not accept referrals from those in your same household.
  • Do not sign up for Amex cards that you’ve had before.
  • Do not sign up for Amex cards using “special links” (e.g. when a link is found to a special offer, but it’s unclear where that link came from or whether you should really be eligible for the offer)
    • Extra cautious: Don’t sign up for any new cards at all.
  • Do not buy gift cards from Simon Mall, Gift Card Mall, GiftCards.com, or any other merchant that is obviously primarily a gift card seller.
    • Extra Cautious: Don’t buy gift cards in order to earn bonus points (e.g. don’t use Amex Gold to buy gift cards at US grocery stores)
    • Extra Extra cautious: Don’t buy gift cards at all with Amex credit cards
  • Do not cycle your credit limit.  E.g. do not run up your credit mid-cycle, pay it off, then run up your credit again multiple times.
  • Pay your credit card bill in full each month.
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