
American Express agrees to pay $230 million to settle allegations of deceptive marketing practices targeting small businesses.
At a Glance
- AmEx plans to pay $230 million to settle criminal and civil probes over alleged deceptive sales practices.
- The settlement includes $138.4 million in fines and a non-prosecution agreement with the DOJ.
- Allegations include misrepresenting card rewards, unauthorized credit checks, and false tax benefit claims.
- The company fired about 200 employees following an internal investigation in 2021.
AmEx Faces Consequences for Deceptive Practices
American Express, one of the nation’s leading credit card companies, has agreed to pay approximately $230 million to settle allegations of deceptive marketing practices. The settlement, reached with the U.S. Department of Justice, addresses claims that the company targeted small businesses with misleading information about its credit card rewards and fees between 2014 and 2021.
The settlement includes $138.4 million in fines and a non-prosecution agreement with the DOJ. This resolution covers both criminal and civil probes into AmEx’s sales tactics, which allegedly included aggressive marketing to small-business owners, misrepresenting card rewards and fees, and conducting unauthorized credit checks.
American Express will pay approximately $230 million to resolve a Department of Justice criminal wire fraud investigation and settle allegations of deceptive marketing
It follows recent agreements by Mastercard and Block to settle claimshttps://t.co/ct5JOHHEOW
— NBC New York (@NBCNewYork) January 17, 2025
Allegations of Fraudulent Practices
According to the Justice Department, AmEx employees engaged in a range of deceptive practices. These included overstating business incomes, issuing unsolicited cards, and submitting false financial information. In some cases, the company allegedly used fake employer identification numbers to help customers obtain credit cards.
The company was also accused of misleading marketing practices related to its wire products. AmEx allegedly claimed that fees were tax-deductible and reward points were tax-free, based on incorrect tax advice. These deceptive practices extended from 2014 to 2021, encompassing a significant period of the company’s recent operations.
AmEx’s Response and Corrective Actions
In response to these 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 stated that it cooperated with regulators, revised its training and compensation systems, and voluntarily worked to address the problem.
While the settlement does not include an admission of liability or wrongdoing by AmEx, which denied certain allegations, it does bring closure to a troubling chapter in the company’s history. The financial impact of these practices has been reported in past fiscal periods, and AmEx has confirmed that the settlement costs will not affect its 2024 earnings guidance.
Implications for the Financial Industry
This settlement serves as a stark reminder of the importance of ethical practices in the financial industry. The Department of Justice emphasized the need for accountability among financial companies engaging in deceptive practices, highlighting the potential threat to the integrity of the financial system.
The AmEx settlement follows similar agreements by other companies in the financial sector, including Mastercard and Block. It underscores the ongoing scrutiny of sales practices and marketing strategies within the industry, particularly those targeting small businesses and consumers. As regulators continue to monitor these practices, financial institutions may need to reassess their sales and marketing approaches to ensure compliance with ethical standards and legal requirements.
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