Article by Jonathan Stempel
American Express, a leading credit card and travel services company, announced this Thursday its plans to settle U.S. criminal and civil investigations with a payment of approximately $230 million. The investigations centered around accusations of misleading practices in offering credit card and wire transfer products to small business clients.
The New York-based company agreed to a settlement of $138.4 million, which included around $108 million in fines. It also consented to a non-prosecution agreement to conclude the U.S. Department of Justice’s criminal and civil investigations.
Furthermore, American Express confirmed that it has established a separate agreement in principle with the Federal Reserve, which is anticipated to be finalized in the upcoming weeks.
Throughout the investigation, American Express claimed to have fully cooperated with investigators, ceased offering some products, implemented disciplinary actions against employees, and enhanced compliance and training procedures.
American Express maintained that the issues brought up by investigators were addressed by 2021, and the settlement payment would not impact their 2024 earnings forecast.
The Department of Justice accused American Express of misrepresenting card rewards and fees from 2014 to 2017. It was also alleged that American Express conducted credit checks without customer consent and provided false financial information for potential clients.
The Department of Justice further claimed that between 2018 and 2021, American Express gave misleading sales pitches about the tax benefits of Payroll Rewards and Premium Wire—wire transfer products. These products were key in the non-prosecution agreement.
The agreement included several internal communications about the products, such as employee complaints which labeled Premium Wire as a “highly dubious product”, allowing customers to personally benefit from writing off expenses as business costs.
American Express’s sales staff were also criticized by the Department of Justice for deceiving regulators by using fake employer identification numbers like “123456788” when opening small business credit cards, as a workaround to replace discontinued co-branded American Express cards.
