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American Express To Pay $230M For Misleading Small Business Customers

American Express said it will pay $230 million to resolve federal investigations into deceptive sales tactics and recordkeeping violations involving small business credit card and wire transfer products.

The American Express logo.

The American Express logo.

Photo Credit: Wikimedia Commons - Marcus Quigmire

The credit card company agreed to pay a $108.7 million civil penalty, the Department of Justice said in a news release on Thursday, Jan. 16. The settlement resolved claims against American Express of deceptive marketing and "dummy" account information.

American Express was accused of engaging in unlawful sales tactics and falsifying records between 2014 and 2021.

"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, head of the DOJ's Civil Division. "Today's settlement makes clear that the department will hold accountable those who violate the trust placed in them to follow the rules governing our financial institutions and to be truthful about their business practices."

In a statement, American Express said it has worked to fix the problems.

"We cooperated extensively with these agencies and our regulators and took decisive voluntary action to address these issues, including discontinuing certain products several years ago, conducting a comprehensive internal review, taking appropriate disciplinary measures, making organizational changes, and enhancing policies, compliance, and training programs," the company said.

The DOJ claimed American Express misrepresented credit card rewards, fees, and credit checks during sales calls with small businesses. American Express employees also submitted false financial information, including overstating business incomes.

A key allegation involved the company’s use of "dummy" Employer Identification Numbers (EINs) to bypass legal requirements for small business credit card applications in 2015 and 2016. Investigators said fake EINs like "123456788" were used to open accounts, with some remaining uncorrected for up to two years.

From 2018 to 2021, American Express employees also misled small business customers about wire transfer products, claiming they offered tax-deductible fees and non-taxable reward points, according to the DOJ. Officials argued the above-market fees were not legitimate business expenses, as they were incurred solely to generate personal benefits.

In a separate case, American Express was accused of giving customers "inaccurate tax advice" for two wire products: Payroll Rewards and Premium Wire. Federal prosecutors said the company misled smaller and mid-sized business owners about the deductibility of fees and the tax-exempt nature of the products' rewards.

American Express was also accused of charging up to 3.5 percent wire service fees, far above their competitors' fees of $0 to $50.

"American Express misled their customers by touting tax breaks that simply didn't exist," said Harry Chavis Jr., Special Agent in Charge of the IRS criminal investigation unit in New York. "This deceitful marketing campaign that involved hundreds of employees defrauding their customers and the government, resulted in AMEX paying more than $138 million to cover their deceit. Regardless of a company's size, every business is required to comply with the laws of this nation, including all tax laws."

American Express agreed to pay more than $138 million under a non-prosecution agreement. The deal includes a $77.7 million fine and forfeiture of $60.7 million in net revenue from wire products sales.

American Express also said it expects to finalize a resolution with the Federal Reserve "in the coming weeks."

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