American Express agrees to pay $230 million to settle fraud claims

NEW YORK (CN) — American Express agreed to pay at least $230 million to resolve federal allegations of wire fraud and deceptive marketing, the company announced Thursday.

As part of a non-prosecution agreement filed in the Eastern District of New York, the company will pay more than $138 million to resolve the government's claims that it gave “inaccurate tax advice” to current and potential customers, plus another $108.7 million to settle civil Department of Justice allegations that it deceptively marketed credit cards to consumers. (Courthouse News reached out to American Express to clarify the discrepancy between the government figures, which total $246.7 million, and the $230 million announced by American Express. The company had not replied by press time.)

According to the U.S. Attorney’s Office for the Eastern District of New York, American Express marketed its wire transfer products, Payroll Rewards and Premium Wire, to small and mid-size businesses trying to save on taxes, telling them that wire payments were tax-deductible business expenses — and otherwise, they would have paid taxes on the fees.

But that claim was false, prosecutors say, and the company never consulted with tax professionals to verify the tax advice it offered.

“Financial institutions like American Express have no business pitching inaccurate tax avoidance schemes to sell products and turn a quick profit,” Judy Philips, acting attorney for the Eastern District of New York, said in a statement. “This resolution ensures that American Express will be held financially accountable for the unacceptable conduct of its sales employees in misrepresenting the tax benefits of these products.”

Prosecutors added that an internal investigation into these marketing practices in 2021 led to about 200 employees being fired. By November of that year, the two products were discontinued entirely.

In addition, the Department of Justice says the banking giant allowed certain small business customers to acquire American Express credit cards without the required employer identification numbers; failed to tell customers when credit checks would be performed; and submitted false financial information to prospective customers.

“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 M. Boynton, principal deputy assistant attorney general, said in a statement.

American Express said it also reached an agreement with the Federal Reserve regarding investigations into “historical sales practices for certain U.S. small business customers,” and expects that deal to be finalized in the coming weeks.

The banking giant said it cooperated extensively with the government agencies and accordingly discontinued certain products, conducted a comprehensive internal review, made organizational changes and enhanced compliance and training programs.

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