American Express said on Thursday it will pay about $230 million to settle criminal and civil probes into alleged deceptive practices in selling credit card and wire transfer products to small business customers.
The credit card and travel services company agreed to pay $138.4 million, including about $108 million in fines, and enter a non-prosecution agreement to end criminal and civil probes by the US Department of Justice.
“Pursuant to the agreements and after crediting, American Express will pay approximately $230 million in total to resolve these matters,” the company said in a statement on Thursday.
American Express said it also reached an agreement with its regulators at the Federal Reserve, which it expects will be finalized in the coming weeks.
Between 2014 and 2017, some AmEx staffers used aggressive sales tactics to pressure small-business owners into signing up for credit cards, according to a DOJ press release.
To secure the sales, employees would misrepresent card rewards and fees and check credit reports without asking, the DOJ said. Sometimes, staffers would issue cards that were not sought out, according to The Wall Street Journal, who reported on the schemes in 2020.
Salespeople would also allegedly submit false financial information for customers, like “overstating a business’s income,” the Justice Department’s press release said.
AmEx also tried to “deceive its federally insured financial institution” to let customers get credit cards without the required employer identification numbers by using “dummy” EINs like “123456788” through 2015 and 2016, the DOJ claimed.
Along with the sketchy credit card sales tactics, AmEx workers misleadingly marketed wire products – pitching them as a way for customers to avoid paying taxes, according to prosecutors.
In 2018 and 2019, AmEx launched two wire products called Payroll Rewards and Premium Wire.
Salespeople told customers – mostly small- and mid-sized businesses – that the fees were tax-deductible as a business expense, and that without the wire service, customers would have to pay taxes on the fees, according to prosecutors.
Customers were also told that the reward points from the transaction were earned tax-free – but that pitch “relied on incorrect tax advice, namely, that the wiring fee was deductible in its entirety as a business expense,” prosecutors said.
An internal investigation in early 2021 led the company to fire about 200 employees, and the wire products were discontinued later that year, according to prosecutors.
The company said it cooperated with agencies and regulators on the issue, along with firing and disciplining some employees, changing its training system and reworking its compensation plans.
Other major firms, like Mastercard and Block, also recently reached large settlements with prosecutors or regulators.
