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American Express will pay about $230mn to resolve a US federal investigation into allegations that it deceptively marketed credit card and wire transfer products to small businesses.
The Department of Justice said the alleged practices involved making false assertions from 2018-21 to small business customers that its Payroll Rewards and Premium Wire products carried certain tax benefits. American Express was also accused of misrepresenting card rewards and fees, and allowing certain customers to use falsified employer identification numbers from 2014-17.
In the tax matter, American Express allegedly transferred money for clients at an above-market fee, and then awarded them rewards points. It told customers the fees were tax deductible and that the reward points were not taxable.
Under the terms of the settlement covering the Payroll Rewards and Premium Wire allegations, American Express would pay a criminal fine and enter a non-prosecution agreement with federal prosecutors in Brooklyn, according to the DoJ.
“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 Boynton, head of the DoJ’s civil division, said in a statement.
American Express said in a statement that it co-operated with authorities, discontinued some product offerings, took disciplinary action and made organisational changes. It said the $230mn had been mostly set aside in prior periods, and that it had also reached an agreement in principle to resolve a Federal Reserve enforcement action covering the same conduct.
“We co-operated extensively with these agencies and our regulators and took decisive voluntary action to address these issues,” American Express said, adding it expected the agreement with the Fed to be finalised in the coming weeks.
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