American Express, the renowned credit card company, has agreed to pay $230 million to settle charges brought by the U.S. Department of Justice (DOJ) regarding deceptive marketing and inadequate recordkeeping practices in its small business credit card operations. This settlement marks a significant development in the financial industry’s ongoing struggle with regulatory compliance and ethical business practices.
Allegations and Violations
The DOJ’s investigation uncovered several concerning practices by American Express:
- Dummy Account Information: The company allegedly entered false account information for businesses applying for credit cards, compromising the integrity of their recordkeeping systems.
- Misrepresentation of Rewards and Fees: Employees were found to have misled customers about the rewards and fees associated with their credit card products.
- Unauthorized Credit Checks: The company failed to disclose whether credit checks would be conducted without customer consent
- False Tax Break Claims: American Express marketed a wire product for business owners to pay payroll directly from their Amex accounts, falsely claiming that the associated fees were tax-deductible.
These deceptive practices reportedly occurred from 2014 through 2021, highlighting a prolonged period of non-compliance.
Settlement Details
The $230 million settlement is structured as follows:
- A civil penalty of $108.7 million, plus 4% annual interest2.
- A criminal fine and forfeiture totaling $138.4 million as part of a non-prosecution agreement with the U.S. Attorney’s Office for the Eastern District of New York.
American Express will receive a credit of $30.35 million toward the civil penalty if it fully pays the forfeiture and fine amounts due under the criminal resolution.
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