American Express to Pay $230 Million in Fines
American Express will pay about $230 million to settle U.S. criminal and civil probes into alleged deceptive practices for small business credit cards.
The settlements include a $108.7 million civil penalty from the Justice Department and a non-prosecution agreement with the Eastern District of New York over a criminal investigation into some of the practices. American Express has also reached an agreement in principle with its regulators at the Federal Reserve which is expected to be finalized in the coming weeks.
From 2014 through 2017, American Express deceptively marketed credit cards through the conduct of an affiliated entity that initiated sales calls to small businesses. The alleged deceptive practices included misrepresenting the card rewards or fees and whether credit checks would be done without a customer’s consent and submitting falsified financial information for prospective customers, such as overstating a business’s income.
American Express also engaged in practices to deceive its federally insured financial institution into allowing certain small business customers to acquire American Express credit cards without the required employer identification numbers (EINs). EINs are required by law if the card recipient is a business entity such as a corporation or partnership. American Express employees used “dummy” EINs such as “123456788” in opening small business credit cards in 2015 and the first half of 2016. American Express allegedly allowed these “dummy” EINs to remain on the credit card accounts for up to two years before remediating the problem.
Additionally, from 2018 through 2021, American Express misled customers in sales pitches about the tax benefits of wire transfer products known as Payroll Rewards and Premium Wire. American Express allegedly would wire money for an above-market fee ranging from 1.77% to 3.5%, compared to $0 to $50 fees offered by competitors in the marketplace and award the businesses or the business owners credit card membership reward points. American Express sales employees allegedly told customers that the wire transfer fees were tax deductible as business expenses, while the reward points earned on the transaction were not taxable, and thereby afforded the customer tax-free benefits.
In early 2021, as concerns grew regarding the way PR/PW was marketed, an internal investigation commenced, which ultimately resulted in the termination of approximately 200 employees. In the summer of 2021, AMEX stopped enrolling new customers in the products. In September 2021, a cap was instituted of $280,000 per wire sent. In November 2021, the products were discontinued entirely.
Credit: Source link
