American Express pays $230 million to settle deceptive marketing and fraud investigation

American Express has agreed to pay $230 million to settle a federal investigation into deceptive marketing practices and civil fraud allegations, the Justice Department announced Thursday.

Under the settlement issued by the Department of Justice, American Express agreed to pay a civil penalty of more than $108 million to resolve allegations that the company violated the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA).

In a separate statement, the Justice Department said American Express entered into a non-prosecution agreement and agreed to pay more than $138 million in exchange for engaging in sales practices that provided consumers with incorrect tax advice.

The Justice Department argued that the New York-based company deceptively marketed credit card and wire transfer products by inserting “bogus” employer ID numbers into its bank’s credit card accounts. The investigation began in 2021.

“When financial companies engage in deceptive sales tactics or falsify information to cover up a failure to follow applicable regulations, they threaten the integrity of our financial system,” Brian Boynton, chief deputy assistant attorney general, said in a statement.

Boynton said Thursday’s settlement makes clear that the Justice Department will hold accountable those who violate consumers’ trust in financial services.

The Department of Justice alleged that from 2014 to 2017, American Express deceptively marketed credit cards using an affiliated entity that made sales calls to small businesses. The company will then misrepresent card rewards or fees, conduct credit checks without the consumer’s consent and provide false financial information to customers such as overstating the company’s income, according to the Department of Justice.

The department also alleged that the company deceived its federally insured financial institution into allowing small businesses to obtain credit cards without the required identification. Employer identification numbers are required by law, but the Justice Department alleges that American Express used “fake” numbers to open cards for small businesses from 2015 to 2016.

The Justice Department said American Express deceptively marketed wire transfer products to small business customers from 2018 to 2021. Employees allegedly told consumers that their wire transfer fees were tax deductible as business expenses when they were not.

In a statement, American Express confirmed the settlement agreement, noting that the company “cooperated extensively” with agencies that had been investigating, discounted products for years, conducted an internal review and implemented other regulatory changes.

“Under the agreement and after payment, American Express will pay approximately $230 million in the aggregate to resolve these matters,” the company said in a statement. “We expect the decision to be finalized with the Federal Reserve in the coming weeks.”