American Express To Pay $230 Million In Fines For Aggressive Sales Practices

American Express has agreed to pay approximately $230 million in penalties over deceptive practices tied to how it sold credit cards and wire services to small-business customers.

The settlements include a $108.7 million civil penalty from the Justice Department and a nonprosecution agreement with the Eastern District of New York over a criminal investigation into some of the practices. The company has also reached an agreement in principle with its regulators at the Federal Reserve that it expects will be finalized in the coming weeks.

The Fed matter will result in a penalty that Amex said is included in the roughly $230 million total.

The Wall Street Journal was the first to report on these practices, with a series of stories about some Amex salespeople strong-arming business owners to boost sales of cards and other products, including small-business card sales tactics that involved misrepresenting card rewards and fees and checking credit reports without consent.

Among the practices that the Journal reported on and the DOJ cited were Amex’s deceptive sales and marketing of wire products that were pitched to customers as being helpful to avoid paying taxes. The card company was also cited for its practice of entering “dummy” employer identification numbers on small-business credit-card accounts, a shortcut salespeople used to increase card sign-ups, the Journal reported.

Amex said it had cooperated with the agencies and regulators to address the problems, including disciplining staff, and changing its organization and training. It said the problems had ended in 2021 or earlier.

The problematic card sales practices began when Amex was scrambling to retain Costco small-business customers after the warehouse club ended its long-running exclusive partnership with the card company. Small businesses were a particularly valuable slice of the Costco cohort, and the potential revenue hit to Amex from the loss of Costco customers was enormous.

Amex launched an aggressive campaign to keep those business cardholders, which ushered in an era of escalating sales goals and hefty commissions that persisted until at least until the Journal began reporting on the practices in 2020.

The Costco retention campaign ended in 2016, but the sales practices didn’t, the Journal reported. Salespeople who had grown accustomed to the big commissions from the Costco retention program and had to meet high monthly sales targets continued on with questionable practices, some of which were flagged to higher ups, the Journal reported.

Many of the findings in the U.S. government’s probes matched the Journal’s reporting. For example, Amex employees used “dummy” employer identification numbers such as “123456788” in opening small business credit cards as part of the Costco retention program.

In 2023, Amex agreed to pay $15 million to the Office of the Comptroller of the Currency to settle an investigationinto some of its business-card sales practices that were also tied to the Journal’s reporting. The OCC penalty orderconfirmed several findings that the Journal reported.

Write to AnnaMaria Andriotis at annamaria.andriotis@wsj.com