American Express said Thursday it will pay about $230 million to resolve criminal and civil investigations into alleged fraud in the sale of credit card and wire transfer products to small business customers.
The credit card and travel services company has agreed to pay $138.4 million, including about $108 million in fines, and enter into a non-prosecution agreement ending criminal and civil investigations by the U.S. Department of Justice.
“Pursuant to the agreement and post-credit, American Express will pay a total of approximately $230 million to resolve these matters,” the company said in a statement Thursday.
American Express also said it has reached an agreement with regulators at the Federal Reserve and expects the deal to be completed in the coming weeks.
From 2014 to 2017, some AmEx staff used aggressive sales tactics to coerce small business owners into signing up for credit cards. According to a press release from the Department of Justice.
To secure sales, employees lied about card benefits and fees and checked credit reports without asking, the Justice Department said. Staff sometimes issued unsolicited cards; According to the Wall Street Journalreported on this plan in 2020.
The sales representatives are also suspected of providing false financial information to customers, including “exaggerating the company's income,” according to a Justice Department press release.
Additionally, in 2015 and 2016, AmEx attempted to trick customers into obtaining credit cards without the required Employer Identification Number by using “dummy” EINs such as “123456788,” which “receives federal insurance coverage.” The Department of Justice alleged that he attempted to defraud applicable financial institutions.
In addition to poor credit card sales tactics, AmEx employees engaged in misleading marketing touting wire products as a way for customers to avoid paying taxes. According to the prosecutor.
In 2018 and 2019, AmEx launched two wire products called Payroll Rewards and Premium Wire.
Prosecutors said the salespeople told their customers, mostly small and medium-sized businesses, that the fees were a tax-deductible expense and that without the communications service, customers would have to pay taxes on the fees.
Customers were also told that reward points from the deal would be earned tax-free, but the pitch was “based on incorrect tax advice – that airtime charges are fully deductible as a business expense.” the prosecutor said.
Prosecutors said the company fired about 200 employees following an internal investigation in early 2021, and wire products were discontinued later that year.
The company said it was working with government agencies and regulators on the issue, including firing and disciplinary action against some employees, changing training programs and reviewing compensation plans.
Other major companies, including Mastercard and Block, have also recently reached large settlements with prosecutors and regulators.
