American Express to Pay $230 Million to Settle Accusations of Deceptive Practices

The American Express logo and trading symbol are displayed at the New York Stock Exchange on Dec. 6, 2017. Brendan McDermid/Reuters

American Express has agreed to pay more than $247 million to resolve criminal and civil investigations into alleged deceptive marketing and fraudulent sales tactics related to its wire transfer and credit card products, according to the U.S. Department of Justice (DOJ).

The total settlement includes a $77.7 million criminal fine, $60.7 million in forfeiture under a non-prosecution agreement with the U.S. Attorney’s Office for the Eastern District of New York, and a $108.7 million civil penalty. The company noted that after applying credits, it will pay approximately $230 million.

The criminal settlement addresses alleged misleading marketing of two wire transfer products—Payroll Rewards and Premium Wire—while the civil penalty resolves allegations of deceptive credit card marketing and recordkeeping violations.

American Express employees are accused of misleading customers by falsely claiming that the high fees for Payroll Rewards and Premium Wire were fully tax-deductible and that the Membership Rewards points earned were tax-free.

These claims violated tax laws that require business expenses to be both “ordinary” and “necessary.”

Additionally, between 2014 and 2017, American Express allegedly deceived small businesses by misrepresenting credit card rewards, fees, and credit checks. Employees also reportedly used fake Employer Identification Numbers (EINs) to bypass federal regulations for small business credit cards.

“Financial institutions like American Express have no business pitching inaccurate tax avoidance schemes to sell products and turn a quick profit,” said Acting U.S. Attorney Judy Philips. “This resolution ensures that American Express will be held financially accountable for the unacceptable conduct of its sales employees.”

The company said in a Jan. 16 statement they had also reached “an agreement in principle with the Staff of the Board of Governors of the Federal Reserve System to resolve previously disclosed investigations into historical sales practices for certain U.S. small business customers, which the company ended in 2021 or earlier.” That announcement is expected in the coming weeks.

“We cooperated extensively with these agencies and our regulators and took decisive voluntary action to address these issues, including discontinuing certain products several years ago, conducting a comprehensive internal review, taking appropriate disciplinary measures, making organizational changes, and enhancing policies, compliance, and training programs,” American Express said in a statement.

The company said the settlement costs were largely accounted for in prior periods, leaving its 2024 financial guidance unaffected.

To address these issues, American Express said they had launched an internal investigation in early 2021, resulting in the termination of approximately 200 employees involved in the misconduct.

The company also discontinued the problematic wire products by November 2021 and implemented stricter compliance measures.

The DOJ acknowledged these corrective actions and the company’s lack of prior criminal history in the past 18 years as factors in reaching the settlement.

“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,” Principal Deputy Assistant Attorney General Brian M. Boynton stated.