The household credit card name American Express has been given a $108.7 million civil penalty for deceptively marketing specific products and for financial regulatory breaches.
American Express allegedly breached the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA). According to the Justice Department, the company did so through the marketing of credit cards, wire transfer products, and certain “dummy” information, such as Employer Identification Numbers (EINs).
According to the action, American Express will enter into a Non-Prosecution Agreement with the U.S. Attorney’s Office for the Eastern District of New York and pay a criminal fine and forfeiture.
American Express to pay million dollar civil penalty
Between 2014 and 2017, American Express is reported to have “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 company is under scrutiny from regulators after they reportedly deceived its federally insured financial institution in “allowing certain small business customers to acquire” American Express credit cards without the required employer identification numbers (EINs).
American Express allegedly allowed credit cards with “dummy” EINs to exist for over two years after their creation and were assigned to small businesses and vendors. These cards were “sold to replace an American Express co-branded credit card that was being discontinued during that time period.”
From 2018 through 2021, the company also sold misleadingly marketed wire transfer products advertised as Payroll Rewards and Premium Wire to its small business customers. The United States has challenged advertised refundable tax deductions with the products.
American Express would allegedly wire “money for an above-market fee that was far in excess of that offered by competitors in the marketplace and award the businesses or the business owners credit card membership reward points. American Express sales employees allegedly told customers that the wire transfer fees were tax deductible as business expenses, while the reward points earned on the transaction were not taxable, and thereby afforded the customer tax-free benefits.”
The resolution was agreed upon by Attorneys Daniel Spiro and Mary Beth Hickcox-Howard of the Civil Division’s Commercial Litigation Branch, Fraud Section, in connection with the Legal Division of the Federal Reserve Board of Governors and the Office of Comptroller of the Currency’s Chief Counsel’s Office.
“This multi-million-dollar settlement holds American Express accountable for violating FIRREA through unlawful sales tactics and recordkeeping requirements, and deceiving small business customers who placed their trust in the Company,” said Special Agent in Charge Jeffrey D. Pittano of the Federal Deposit Insurance Corporation Office of Inspector General (FDIC-OIG), Mid-Atlantic Region.
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