American Express Co. will pay about $230 million to resolve a long-running investigation into some of the firm’s prior sales practices which regulators said misled small-business owners.
Amex reached agreements with federal prosecutors and the Federal Reserve to settle the allegations, according to statements from the parties involved.
The misconduct stems from a practice where Amex workers offered products — including its Premium Wire service — as a scheme to lower taxes and earn credit-card points. Amex discontinued the Premium Wire offering and sales practices in 2021 and fired workers over the misconduct.
“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,” Principal Deputy Assistant Attorney General Brian M. Boynton said in a statement. “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 and to be truthful about their business practices.”
“We cooperated extensively with these agencies and our regulators and took decisive voluntary action to address these issues,” a spokesperson for Amex said in a statement. As well as discontinuing the products and disciplinary action, the company undertook an internal review and boosted policies, compliance and training programs, it said.
The $230 million penalty comprises $138 million for the Eastern District of New York and the Justice Department, according to the federal prosecutors. Amex will also pay a portion to the Fed after striking an agreement-in-principal to be finalized in the coming weeks. The costs were largely reserved for in earlier periods and don’t impact the company’s 2024 guidance, according to Amex.
Amex has faced a slew of regulatory probes over the matter for years. It began responding to investigations by the Office of the Comptroller of the Currency and the Justice Department in 2020, and received a grand jury subpoena from the U.S. Attorney’s Office for the Eastern District of New York in 2021. In October, Amex said the New York Department of Financial Services and the Fed were also looking into the matter.
In 2023, Amex paid $15 million in civil penalties to settle with the OCC. The Consumer Financial Protection Bureau similarly looked into the practices but closed its inquiry without levying a financial penalty in 2023.