American Express Settles Deceptive Marketing Allegations for $108.7 Million

American Express, a leading global financial services company, has agreed to pay a $108.7 million civil penalty to settle allegations that it engaged in deceptive marketing practices, the U.S. Justice Department announced on Thursday. The settlement resolves claims that American Express violated the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA) by deceptively marketing credit card and wire transfer products and by entering "dummy" Employer Identification Numbers (EINs) in the credit card accounts of its affiliate bank.

The U.S. alleged that American Express, through an affiliated entity, initiated sales calls to small businesses and misrepresented the card rewards or fees, as well as whether credit checks would be done without a customer's consent. The company also submitted falsified financial information for prospective customers, such as overstating a business's income. Additionally, 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 EINs. The company allegedly used "dummy" EINs such as "123456788" in opening small business credit cards in 2015 and the first half of 2016.



Contemporaneous with the civil resolution, 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. The agreement deals exclusively with the Payroll Rewards and Premium Wire programs referenced above.

"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. "The FDIC-OIG will continue to work with our law enforcement partners to investigate financial crimes that harm customers and undermine the integrity of our Nation’s financial institutions."

The settlement is a significant development for American Express, which has been facing increased regulatory scrutiny in recent years. In 2023, the company increased provisions for credit card defaults, and shares fell sharply after the credit card provider boosted the money it put aside to cover for customers defaulting on their payments. American Express reported third-quarter fiscal 2023 provisions for credit losses of $1.233 billion, up from $1.198 billion in the previous quarter and $778 million a year ago.

As American Express works to address the allegations and rebuild its reputation, investors should closely monitor the company's compliance efforts and the potential long-term financial implications of the settlement. The company's ability to maintain customer trust and adhere to regulatory standards will be crucial in determining its future success.