
American Express agrees to pay $230 million to settle allegations of deceptive marketing practices targeting small businesses.
At a Glance
- AmEx intends to pay $230 million in a settlement over accusations of deceptive sales tactics.
- The agreement includes $138.4 million in fines and a non-prosecution deal with the DOJ.
- Employees were accused of aggressive sales tactics, misrepresenting rewards and fees.
- The settlement follows an internal investigation and firing of about 200 employees.
American Express Faces Costly Settlement Over Misleading Practices
American Express, one of the nation’s leading credit card companies, has agreed to pay approximately $230 million to settle criminal and civil probes related to deceptive sales practices targeting small businesses. The settlement, announced by the U.S. Department of Justice, addresses allegations of misleading marketing tactics employed by AmEx staff between 2014 and 2021.
The agreement includes $138.4 million in fines and a non-prosecution agreement with the DOJ. This resolution comes after an internal investigation in 2021 led to the firing of approximately 200 employees and the discontinuation of certain wire products that were at the center of the controversy.
Deceptive Practices and Aggressive Sales Tactics
According to the DOJ, AmEx employees engaged in aggressive sales tactics aimed at small-business owners. These practices included misrepresenting card rewards and fees, checking credit reports without consent, and in some cases, issuing unsolicited cards and submitting false financial information.
“When financial companies engage in deceptive sales tactics or falsify information to cover up a failure to follow applicable regulations, they threaten the integrity of our financial system,” said Principal Deputy Assistant Attorney General Brian M. Boynton.
One of the most egregious allegations involves the use of fake employer identification numbers (EINs) to help customers obtain credit cards. In some instances, AmEx allegedly used “dummy” EINs like “123456788” and took up to two years to correct these false identifiers.
Misleading Tax Advice and Wire Products
The settlement also addresses claims that AmEx provided incorrect tax advice to customers, particularly regarding its Payroll Rewards and Premium Wire products. The company allegedly marketed these products as offering tax benefits that did not actually exist.
These deceptive practices extended to claims that fees were tax-deductible and reward points were tax-free, based on incorrect tax advice. The DOJ emphasized that such actions undermined the trust placed in financial institutions to follow regulations and be truthful about their business practices.
AmEx’s Response and Corrective Measures
In response to the allegations, American Express has taken several steps to address the issues raised by regulators. The company stated that it “cooperated extensively with these agencies and our regulators and took decisive voluntary action to address these issues.”
AmEx has revised its training and compensation systems, fired and disciplined employees involved in the misconduct, and reached an agreement with the Federal Reserve regarding past sales practices related to U.S. small-business clients. The company also emphasized that the settlement costs were previously set aside and will not impact its 2024 earnings guidance.
While the settlement does not include an admission of liability or wrongdoing by AmEx, which denied certain allegations, it serves as a stark reminder of the importance of ethical business practices in the financial sector. The case underscores the need for vigilance in protecting small businesses from deceptive marketing tactics and reinforces the government’s commitment to holding financial institutions accountable for their actions.
Sources
- American Express to pay $230M settlement over claims of deceptive credit card, wire service sales tactics
- Amex pays $230M to resolve DOJ allegations
- American Express to pay $230 million to settle DOJ fraud probe, deceptive marketing claim
- American Express to Pay $230 Million to Settle Deceptive Marketing Claims