AmEx to pay $108.7M to settle allegations of deceptive marketing practices

The American Express (AXP) Company has agreed to pay a $108.7M civil penalty to resolve allegations that it violated the Financial Institutions Reform, Recovery and Enforcement Act of 1989 by deceptively marketing credit card and wire transfer products and by entering “dummy” Employer Identification Numbers in the credit card accounts of its affiliate bank. “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 Justice Department’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.” The United States alleged that, 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. The United States also alleged that American Express 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. Finally, the United States further contended that American Express employees deceptively marketed wire transfer products known as Payroll Rewards and Premium Wire to its small business customers from 2018 through 2021, making false assertions regarding these products’ tax benefits.