American Express has recently reached an agreement to pay roughly $230 million in penalties, mainly over deceptive practices tied to small-business credit cards before 2021. This large penalty consists of a civil money penalty imposed by the Department of Justice and a non-prosecution agreement with the U.S. Attorney’s Office for the Eastern District of New York. In addition, an agreement with the Federal Reserve is expected to be finalized in the coming weeks.
The main issues were as follows:
- From 2014 to 2017, American Express employees provided false information about credit card rewards and fees.
- The company also incorrectly told customers that credit checks did not require customer consent, and submitted false financial information to improve applicants’ odds of approval.
- From 2018 to 2021, employees misled customers during the sales process by making claims about payroll rewards and tax benefits tied to premium wire products, even though those products carried fees far higher than comparable services.
- During 2015 and the first half of 2016, employees even allowed some small-business customers to apply for credit cards without the required Employer Identification Number (EIN), using fake EINs such as “123456788” to open small-business credit cards.
As an important compliance matter, American Express is now under pressure to reexamine its sales practices and how it communicates with customers. Going forward, the company will need to take steps to ensure it does not repeat these mistakes. This case is another reminder that consumers should carefully verify information when applying for credit cards and other financial services.
