American Express Being Investigated by Federal Regulators

American Express' credit card sales practices are under investigation by the inspectors general offices of the Treasury Department, Federal Deposit Insurance Corporation, Federal Reserve, and Office of the Comptroller of the Currency, according to the Wall Street Journal. The regulators are investigating whether the card issuer used aggressive and misleading sales tactics to appeal to business owners and whether the customers were harmed as a result.

The Allegations Against American Express

American Express is one of the largest credit card issuers in the U.S., ranking second by purchase volume behind Chase, according to the Nilson Report. But recently, the card issuer has come under fire from federal regulators over allegations that salespeople misled business owners in an attempt to boost sales.

The allegations, which come from current and former employees of the company, claim that some salespeople misrepresented rewards and fees and even issued cards against the wishes of the customers. 

According to an American Express spokeswoman, the group of salespeople in question had sales that represented 0.25% of the 65 million new cards American Express issued between 2014 and 2019—or roughly 162,500 credit cards.

The spokeswoman also stated that the card issuer resolved the wrongdoing promptly and appropriately, adding that the company has been cooperating with regulators since last spring on the matter.

The Office of the Comptroller of the Currency (OCC) is specifically targeting issues that arose when American Express issued cards to replace its co-branded Costco business credit card after the wholesale club switched to Citibank in 2015. American Express launched an aggressive campaign at the time to retain those customers.

According to reports, that may have included salespeople calling from personal cell phones and unrecorded desk lines and also taking personal information, including Social Security numbers and addresses, to submit applications for business owners without their consent.

When Wells Fargo was caught in its fake accounts scandal in 2016, the OCC requested that other banks, including American Express, review their own sales practices. At the time, American Express disclosed that it found a few cases, but later a whistleblower report claimed that the card issuer understated the issue in its report.