In a significant financial settlement, American Express (Amex) has agreed to pay approximately $230 million to resolve allegations of deceptive sales practices. The issue primarily affected small-business owners and involved misleading promotions related to credit card and wire transfer products. Federal prosecutors and the Federal Reserve were involved in reaching this settlement. Amex ceased the controversial Premium Wire service and associated sales tactics in 2021, following the allegations. The company also dismissed employees implicated in the misconduct. The settlement amount is divided between two agreements, with $138 million allocated to the Eastern District of New York and the Justice Department, while the remainder is designated for the Federal Reserve.
Detailed Report on Amex's Settlement Over Deceptive Sales Tactics
In a landmark agreement, American Express has committed to paying a substantial sum of $230 million to settle charges of employing misleading sales techniques. These tactics were particularly detrimental to small-business owners who were misled into believing that certain services, such as the Premium Wire offering, could reduce taxes and accumulate credit-card points. The controversy came to light several years ago, prompting Amex to discontinue these services and terminate employees involved in the misconduct.
The resolution was reached with federal authorities, including the Federal Reserve and the Department of Justice. The settlement is split into two parts: $138 million will be paid to the Eastern District of New York and the Justice Department, while the remaining portion is earmarked for the Federal Reserve. This agreement-in-principle is expected to be finalized in the coming weeks. Amex has stated that the costs associated with these settlements were largely accounted for in previous financial periods and will not impact the company’s guidance for 2024.
Amex has taken decisive action to address these issues, conducting an internal review, implementing organizational changes, and enhancing compliance and training programs. In response to the settlement, Brian Boynton, Principal Deputy Assistant Attorney General of the US Justice Department Civil Division, emphasized the importance of maintaining integrity within the financial system and holding accountable those who violate trust and regulations.
From a journalist's perspective, this case underscores the critical need for transparency and accountability in the financial sector. It serves as a stark reminder that companies must adhere to ethical standards and regulatory guidelines to protect consumers and maintain public trust. The swift actions taken by Amex, including discontinuing problematic products and improving internal policies, demonstrate a commitment to rectifying past mistakes and fostering a more trustworthy business environment.