American Express is facing a federal probe into the company’s business-card sales practices.
Reports claim that the government is investigating whether American Express used aggressive and misleading sales tactics to sell credit cards to small business owners and whether these practices harmed customers. The investigators are also looking into whether specific employees contributed to the alleged behavior, and if higher-level employees supported it.
According to people familiar with the matter, the inspector general offices of the Treasury Department, Federal Deposit Insurance Corp., and Federal Reserve are all involved in the investigation of American Express.
“We have conducted a detailed, independent review of these sales from this time period, and found no evidence of a pattern of misleading sales practices,” said American Express.
The investigation is in the early stages as federal investigators speak with current and former American Express employees. Also, part of the investigation is an inquiry into whether American Express’ compensation plans encouraged its employees to cut corners.
It is reported that the Office of the Comptroller of the Currency is also investigating the business card selling practices of American Express.
The OCC’s investigation is focused on the cards issued to business owners who previously had co-branded American Express/Costco cards. American Express lost its partnership with Costco in 2016 when the company went to partner with CitiGroup. American Express launched an aggressive campaign to keep the customers who had the co-branded cards.
A whistleblower complaint filed with the OCC last year alleged that American Express had understated the number of problematic sales it reported to the OCC after the office asked banks to self-review their sales practices. The complaint detailed a conflict of interest with how American Express conducted its internal investigation.
The complaint stated how American Express recruited a small number of employees in the company’s sales division to help with the OCC-requested review. Those employees were told by the company that the sales division’s future depended on the outcome of the review.
In March of 2020, The Wall Street Journal reported on the “strong-arm” practices that American Express employees were using against small business owners to boost sales. Part of the story alleged that American Express employees misrepresented card rewards and fees or issued cards that customers had not sought.
At the time of that report, a spokeswoman for American Express said that sales to small business owners only “represented approximately 0.25 percent of the 65 million total new cards American Express acquired worldwide between 2014 and 2019.”
More than a dozen American Express employees came forward and told The Wall Street Journal that such practices occurred to boost their sales. At the time, American Express admitted to only finding a very small number of problems with its employees’ sales practices. According to the company, the issues were resolved “promptly and appropriately,” including disciplinary actions.