UPDATE 1-US fines American Express over convenience checks

NEW YORK, June 30 (Reuters) - A U.S. regulator has fined American Express Co (AXP.N) and ordered it to reimburse credit card customers for failing to honor "convenience checks."

The Office of Thrift Supervision fined the New York-based credit card and travel services company $250,000, and ordered it to establish a $1.5 million reserve for affected customers. It said America Express will add to the reserve as necessary.

American Express consented to the penalties without admitting or denying wrongdoing, the OTS said.

According to the regulator, American Express Bank FSB, of Salt Lake City, sent the checks to card customers, but declined to honor them after customers' credit ratings or credit limits fell.

The regulator said the declined checks resulted in returned check fees and other costs, and might have hurt customers' credit scores.

American Express will reimburse customers $160 for each declined check, and pay legitimate claims above that amount. It has discontinued the check program until it finds a substitute that does not raise regulatory concerns, the OTS said. (Reporting by Jonathan Stempel, editing by Leslie Gevirtz)