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Major Credit Card Company Embroiled in Deceptive Marketing Scandal
The American Express Company, based in New York, New York, has agreed to pay a staggering $108.7 million civil penalty to resolve allegations that it 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 in the credit card accounts of its affiliate bank.
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, said Principal Deputy Assistant Attorney General Brian M. Boynton, head of the Justice Department’s Civil Division. 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.
The United States alleged that, from 2014 through 2017, American Express deceptively marketed credit cards through the conduct of an affiliated entity that initiated sales calls to small businesses. The alleged deceptive practices included misrepresenting the card rewards or fees and whether credit checks would be done without a customer’s consent and submitting falsified financial information for prospective customers, such as overstating a business’s income.
The United States also alleged that 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 employer identification numbers (EINs). EINs are required by law if the card recipient is a business entity such as a corporation or partnership; the requirement does not apply to sole proprietors. The United States alleged that American Express employees used dummy EINs such as 123456788 in opening small business credit cards in 2015 and the first half of 2016. These cards were sold to replace an American Express co-branded credit card that was being discontinued during that time period.
The United States further contended that American Express employees deceptively marketed wire transfer products known as Payroll Rewards and Premium Wire to its small business customers from 2018 through 2021, making false assertions regarding these products’ tax benefits. As to both products, American Express allegedly would wire money for an above-market fee that was far in excess of that offered by competitors in the marketplace and award the businesses or the business owners credit card membership reward points.
Contemporaneously 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. American Express, the defendant/respondent, is the The American Express Company, a company based in New York, New York. The exact criminal charges are the violations of the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA). The city and state of the alleged crime are New York, New York. The exact date of the alleged crime has not been specified. The sentence or outcome is a $108.7 million civil penalty to resolve the allegations.
Key Facts
- State: New York
- Category: White Collar Crime
- Source: DOJ Press Release â†â€â€
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