Financial Giant Agrees to Pay Hefty Settlement
American Express has reached a landmark agreement to pay approximately $230 million to resolve allegations of deceptive sales practices targeting small-business owners. The settlement, reached with federal prosecutors and the Federal Reserve, marks a significant victory for regulators seeking to protect the integrity of the financial system.
Misleading Tactics Uncovered
At the heart of the issue were Amex representatives promoting services such as the Premium Wire offering, which was falsely marketed as a means to reduce taxes and accumulate credit-card points. These tactics were deemed misleading and potentially harmful to small-business owners.
Corrective Action Taken
In response to the allegations, American Express took swift action, discontinuing the Premium Wire service and associated sales tactics in 2021. The company also dismissed employees implicated in the misconduct and conducted a comprehensive internal review.
Settlement Details
The $230 million financial penalty is split between two agreements, with $138 million allocated to the Eastern District of New York and the Justice Department. A portion of the settlement is earmarked for the Federal Reserve, with the agreement-in-principle expected to be finalized in the coming weeks.
Company Response
American Express emphasized its cooperation with regulatory agencies, stating that the company had taken decisive voluntary action to address the issues, including discontinuing certain products, conducting a comprehensive internal review, and enhancing policies, compliance, and training programs.
Regulatory Crackdown
The US Justice Department Civil Division principal deputy assistant attorney general, Brian Boynton, emphasized the importance of holding financial companies accountable for deceptive sales tactics and falsifying information. The settlement sends a clear message that the department will not tolerate violations of trust and will take action to protect the integrity of the financial system.
Financial Implications
American Express has indicated that the costs associated with the settlements were largely accounted for in previous financial periods and will not affect the company’s financial guidance for 2024.
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