American Express agrees to pay $230 million to settle allegations of deceptive marketing practices targeting small businesses, but denies wrongdoing.
Now that’s a big payout…
At a Glance
- AmEx to pay $230 million in fines and settlements over deceptive marketing claims
- Allegations include misrepresenting card rewards, unauthorized credit checks, and false financial information
- Settlement includes $138.4 million in fines and a non-prosecution agreement with the DOJ
- Company fired about 200 employees following an internal investigation in 2021
- AmEx denies liability but has revised training and compensation systems
American Express Faces Hefty Settlement Over Deceptive Practices
American Express, one of the nation’s leading credit card companies, has agreed to pay approximately $230 million to settle both criminal and civil probes related to deceptive sales practices targeting small businesses. The settlement, reached with the U.S. Department of Justice, addresses allegations of misconduct spanning from 2014 to 2021.
The settlement includes $138.4 million in fines and a non-prosecution agreement with the Justice Department. According to the allegations, AmEx staff employed aggressive sales tactics on small-business owners, misrepresenting card rewards and fees, and conducting unauthorized credit checks.
What Are They Accused Of?
The Justice Department accused American Express of several fraudulent practices. Employees allegedly issued unsolicited cards and submitted false financial information, often overstating business incomes. In some cases, AmEx was accused of using fake employer identification numbers to help customers obtain credit cards.
“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,” Principal Deputy Assistant Attorney General Brian M. Boynton said.
The company also faced allegations of misleading marketing of wire products, falsely claiming that fees were tax-deductible and reward points were tax-free. These claims were reportedly based on incorrect tax advice.
American Express Response and Consequences
In response to the allegations, American Express conducted an internal investigation in 2021, which led to the firing of approximately 200 employees and the discontinuation of the problematic wire products. The company has since cooperated with regulators, revised its training and compensation systems, and reached an agreement with the Federal Reserve regarding past sales practices related to U.S. small-business clients.
“We cooperated extensively with these agencies and our regulators and took decisive voluntary action to address these issues,” American Express stated.
While agreeing to the settlement, AmEx has not admitted to any liability or wrongdoing. The company maintains that the associated financial repercussions have been addressed in preceding financial reporting cycles, and the settlement costs will not impact its 2024 earnings guidance.
This settlement follows similar agreements by other financial companies like Mastercard and Block, highlighting a broader trend of scrutiny on deceptive practices in the financial sector. The DOJ has emphasized the importance of holding financial institutions accountable for violations of trust and misrepresentation of business practices.