American Express (Amex) has agreed to pay approximately $230 million to resolve U.S. criminal and civil investigations into alleged deceptive sales practices involving credit card and wire transfer products targeted at small business customers. The settlement includes a $138.4 million payment to the U.S. Department of Justice (DOJ), encompassing roughly $108 million in fines, and a non-prosecution agreement.
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Breakdown of the Settlement and Allegations
The $230 million settlement comprises two key components: the DOJ agreement and a separate agreement in principle with the Federal Reserve, expected to be finalized soon. Amex has stated that the identified issues ceased by 2021 and the settlement will not impact its 2024 earnings forecast. The company also emphasized its cooperation with investigators, discontinuation of certain products, disciplinary actions against staff, and enhancements to compliance and training programs.
The DOJ’s investigation revealed that from 2014 to 2017, Amex misrepresented card rewards and fees, conducted credit checks without customer consent, and submitted false financial information for potential customers. Furthermore, from 2018 to 2021, Amex misled customers regarding the tax benefits of its Payroll Rewards and Premium Wire transfer products.
Focus on Payroll Rewards and Premium Wire
The non-prosecution agreement specifically centers on the Payroll Rewards and Premium Wire products. Internal communications, including employee complaints, highlighted concerns about Premium Wire, describing it as a “very questionable product” that potentially enabled customers to “write off expenses as a business expense and benefit personally.”
Deceptive Practices in Credit Card Sales
The DOJ also uncovered deceptive practices in Amex’s credit card sales. Sales staff allegedly deceived regulators by using “dummy” employer identification numbers, such as “123456788,” when opening small business credit cards to replace discontinued co-branded Amex cards. This practice aimed to circumvent regulatory scrutiny and maintain sales volume.
Conclusion: Amex Addresses Past Misconduct and Emphasizes Compliance
This substantial settlement underscores the importance of ethical sales practices and transparency in financial services. While Amex acknowledges past misconduct, the company has taken steps to rectify the issues and enhance its compliance framework. The settlement allows Amex to move forward while serving as a reminder of the ongoing need for robust regulatory oversight and ethical business practices within the financial industry.
Amex logo, signifying the company’s brand recognition and presence in the financial services sector.
