American Express Agrees To Massive Payout Over Allegations

American Express has agreed to pay $230 million to settle allegations of deceptive marketing practices targeting small businesses.

At a Glance

American Express has agreed to pay $230 million in settlement over allegations of deceptive sales tactics.
The settlement includes $138.4 million in fines and a non-prosecution agreement with the DOJ.
Allegations include misrepresenting card rewards, hidden fees, and unauthorized credit checks.
The company was accused of using fake employer identification numbers and submitting false financial information.
AmEx reportedly fired about 200 employees and discontinued problematic wire products after an internal investigation.

American Express Faces Hefty Settlement Over 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 targeting small businesses. The settlement, reached with the U.S. Justice Department, resolves both criminal and civil probes into the company’s sales tactics between 2014 and 2021.

The settlement includes $138.4 million in fines and a non-prosecution agreement with the Department of Justice. This agreement comes after accusations that AmEx staff used aggressive sales tactics on small-business owners, misrepresenting card rewards and fees, and checking credit reports without consent.

American Express will pay about $230 million to resolve federal wire fraud investigations and settle allegations of deceptive marketing.

Over $138 million of that is related to giving customers “inaccurate tax advice” and "touting tax breaks that simply didn’t exist."

— More Perfect Union (@MorePerfectUS) January 17, 2025

Allegations of Fraudulent Practices

The Justice Department’s investigation uncovered a range of deceptive practices. Employees allegedly issued unsolicited cards and submitted false financial information, often overstating business incomes. In some cases, AmEx was accused of using fake employer identification numbers to help customers obtain credit cards.

The company was also accused of misleading marketing of wire products, falsely claiming that fees were tax-deductible and reward points were tax-free. These claims were based on incorrect tax advice, leading to further scrutiny from federal authorities.

AmEx’s Response and Corrective Actions

In response to these allegations, American Express conducted an internal investigation, which led to the firing of approximately 200 employees and the discontinuation of the problematic wire products. The company has since cooperated with regulators, revised its training and compensation systems, and reached an agreement with the Federal Reserve regarding past sales practices related to U.S. small-business clients.

“We cooperated extensively with these agencies and our regulators and took decisive voluntary action to address these issues,” a statement from American Express said.

While the settlement does not include an admission of liability or wrongdoing by AmEx, which denied certain allegations, the company has stated that the settlement costs were previously set aside and will not impact its 2024 earnings guidance.

Implications for the Financial Industry

This settlement follows similar agreements by other companies in the financial sector, highlighting a broader trend of increased scrutiny on marketing practices within the industry. The Department of Justice has emphasized the importance of holding financial companies accountable for deceptive practices.

The case serves as a reminder of the need for financial institutions to maintain transparent and ethical marketing practices, especially when dealing with small businesses that may be more vulnerable to deceptive tactics. As the industry continues to evolve, regulators are likely to remain vigilant in protecting consumers and maintaining the integrity of financial services.