AmEx to pay $230M over small business sales claims

American Express settlement overview:

• Who: American Express Co. has agreed to pay $230 million to resolve claims by the U.S. Department of Justice and the Federal Reserve.
• Why: The DOJ and the Federal Reserve had been investigating AmEx over its previous sales practices for some small business customers in the United States.
• Where: The American Express settlement was filed in New York federal court.

American Express Co. has agreed to pay $230 million to resolve a U.S. Department of Justice investigation into the financial services company’s previous sales practices for some small business customers in the United States.

AmEx signed a non-prosecution agreement with the DOJ and said on Jan. 16 that it will pay the amount to end investigations by the DOJ and the Federal Reserve.

The company said it had previously reserved most of the money it will pay to end the investigations of its practices, which it claims ended by 2021.

“We cooperated extensively with these agencies and our regulators and took decisive voluntary action to address these issues, including discontinuing certain products several years ago, conducting a comprehensive internal review, taking appropriate disciplinary measures, making organizational changes, and enhancing policies, compliance, and training programs,” AmEx said in a statement.

The terms of AmEx’s criminal non-prosecution agreement with the U.S. Attorney’s Office for the Eastern District of New York include payment of more than $138 million, consisting of a criminal fine of nearly $78 million and forfeiture of nearly $61 million.

AmEx provided inaccurate tax advice to customers, DOJ alleged

The DOJ claimed AmEx provided inaccurate tax advice to customers and potential customers regarding wire products known as Payroll Rewards and Premium Wire.

Prosecutors said AmEx marketed the products as a way for small and mid-sized businesses to generate tax savings, including through wiring fees that were tax-deductible as business expenses.

That pitch relied on incorrect tax advice, however, since the fees were not actually ordinary or necessary business expenses, prosecutors claimed.

AmEx launched an internal investigation in early 2021 amid growing concerns about how the products were marketed, ultimately firing about 200 employees as a result and implementing a cap on each wire sent before discontinuing the products in November 2021.

Last year, American Express faced a class action lawsuit alleging it managed to avoid liability despite its anti-steering rules that are the “sole impediment” to actual competition in the payment card marketplace.

Have you been affected by the AmEx sales practices at issue in this American Express settlement? Let us know in the comments.

AmEx is represented by Courtney Dankworth, Jonathan Tuttle, David Sarratt and Bruce Yannett of Debevoise & Plimpton LLP. The government is represented by Hiral D. Mehta, Gillian Kassner and Tara McGrath of the U.S. Attorney’s Office for the Eastern District of New York, and by Daniel Spiro and Mary Beth Hickox-Howard of the DOJ’s Civil Division.

The American Express settlement is USA v. American Express Co., Case No. 1:25-cr-00008, in the U.S. District Court for the Eastern District of New York.

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