New York-based American Express Company (American Express) has agreed to pay a $108.7 million civil penalty to resolve allegations that it violated the National Reform, Recovery, and Protection Act of 1989. enforcement of financial institutions (FIRREA) by deceptively marketing credit. card and wire transfer products and entering “dummy” employer identification numbers into its affiliated bank’s credit card accounts.
“When financial companies engage in deceptive sales tactics or falsify information to conceal failure to comply with applicable regulations, they threaten the integrity of our financial system,” said Principal Assistant Attorney General Brian M. Boynton, head of the civil division of the Ministry of Justice. . “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 honest about their business practices. »
The United States alleged that, from 2014 to 2017, American Express deceptively marketed credit cards through an affiliated entity that made sales calls to small businesses. The alleged deceptive practices included misrepresenting card rewards or fees and asking whether credit checks would be done without customer consent and submitting falsified financial information to potential customers, such as overstating income from a business.
The United States also alleged that American Express engaged in practices designed to deceive its federally insured financial institution by allowing certain small business customers to acquire American Express credit cards without identification numbers. Employer Identification (EIN) required. EINs are required by law if the card recipient is a business entity such as a corporation or partnership; this requirement does not apply to individual entrepreneurs. The United States alleged that American Express employees used “dummy” EINs such as “123456788” when opening small business credit cards in 2015 and the first half of 2016. These cards were sold for replace an American Express co-branded credit card that was being sold. interrupted during this period. American Express reportedly allowed these “dummy” EINs to remain on credit card accounts for two years before fixing the problem. American Express knew that many of the small business applicants had previously acquired co-branded cards issued by American Express, in which the card application indicated that EINs were required for corporations or partnerships, but if applicants left the EIN line blank , American Express would assume they are sole proprietors. This practice exacerbated the effects of American Express’s failure to capture the correct EINs when it sold replacement cards to these customers.
Finally, 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 to 2021, making false claims regarding the tax benefits of these products. For both products, American Express would transfer money for above-market fees, well above those offered by competitors in the market, and would award businesses or business owners rewards points for signing up for a credit card. American Express sales employees allegedly told customers that wire transfer fees were tax deductible as a business expense, while rewards points earned on the transaction were not taxable, thereby providing the customer with benefits non-taxable. The United States maintained, however, that above-market cabling costs were not deductible as an ordinary or necessary business expense to the extent that they were incurred by a customer for the sole purpose of generating a personal benefit.
Along 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. This agreement applies exclusively to the Payroll Rewards and Premium Wire programs referenced above. Under the terms of the civil settlement, American Express will receive a credit toward the civil penalty settlement in the amount of $30.35 million if it makes full payment of the forfeiture and fine amounts due under the criminal resolution. .
“This multi-million dollar settlement holds American Express responsible for violating FIRREA through illegal sales tactics and recordkeeping requirements, and for misleading small business customers who placed their trust in the company,” said Special Agent in Charge Jeffrey D. Pittano of the Federal Deposit. Office of Insurance Inspector General (FDIC-OIG), Mid-Atlantic Region. “The FDIC-OIG will continue to work with our law enforcement partners to investigate financial crimes that harm customers and undermine the integrity of our nation’s financial institutions. »
“The multi-million dollar settlement announced today should make it clear that financial companies that engage in fraudulent and deceptive practices will be held accountable for their actions,” said Special Agent in Charge John T. Perez of Operations Headquarters, Office of the Inspector General of the Board of Directors. Governors of the Federal Reserve and the Consumer Financial Protection Bureau. “We are proud to have worked alongside our federal law enforcement partners to achieve this outcome.”
Attorneys Daniel Spiro and Mary Beth Hickcox-Howard of the Civil Division’s Commercial Litigation Branch, Fraud Section, handled the case with assistance from the Legal Division of the Federal Reserve Board of Governors and the Office of Counsel Chief Legal Officer of the Office of the Comptroller of the Currency. Senior Special Agent Brittany Harding of the Office of Inspector General of the Department of the Treasury, Special Agent Will Burmeister of the Office of Inspector General of the Federal Reserve and Senior Special Agent Mike Serra of the Office of Inspector General of the Federal Treasury Assurance Deposit Corporation investigated the matter.
Except for conduct admitted under the criminal resolution, claims resolved by the settlement are allegations only. No responsibility has been determined.
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