American Express Co. (AXP) has announced it has entered into agreements with the U.S. Department of Justice and reached a tentative accord with the Federal Reserve Board of Governors' staff. These arrangements are intended to resolve previously reported investigations into historical sales practices targeting certain U.S. small business clients—practices which were discontinued by 2021. Consequently, American Express will remit nearly $230 million in total to address these issues.
The U.S. Department of Justice contended that, between 2014 and 2017, American Express, via an affiliated entity, engaged in misleading marketing of credit cards during sales calls directed at small businesses. These deceptive practices allegedly involved misrepresenting card rewards or fees, conducting credit checks without customer consent, and providing falsified financial information for potential clients, such as inflating a business's income.
American Express emphasized its extensive cooperation with the agencies and regulators in addressing these issues, having proactively taken voluntary measures to remedy the situation. Actions included the discontinuation of certain products, an exhaustive internal review, the implementation of appropriate disciplinary actions, organizational restructuring, and the enhancement of policies, compliance, and training programs.
The company stated that expenses related to these agreements have largely been accounted for in previous periods, thus not affecting the 2024 financial forecasts. It anticipates finalizing the resolution with the Federal Reserve in the coming weeks.
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