American Express Agrees to Pay Massive Settlement to Resolve Deceptive Marketing Scheme & Fraud Allegations

American Express Company (AMEX) has agreed to pay an estimated $230 million to resolve legal claims arising from deceptive marketing practices and false tax advice related to its Payroll Rewards and Premium Wire products. The multi-faceted settlement includes both civil and criminal resolutions with the U.S. Department of Justice (DOJ), the U.S. Attorney’s Office for the Eastern District of New York, and an expected penalty agreement with the Federal Reserve, which AMEX said is included in the roughly $230 million total.

Under the civil resolution with the DOJ, AMEX has agreed to pay a penalty of $108.7 million to settle allegations of deceptive marketing practices that violated the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA). Between 2014 and 2017, AMEX allegedly misrepresented key information about its credit card and wire transfer products, including overstating potential rewards, improperly handling employer identification numbers (EINs), and promoting the Payroll Rewards and Premium Wire services with false tax-saving claims.

The DOJ alleged that AMEX's sales employees misled customers by claiming that the fees for the wire transfer products were tax-deductible as business expenses and that the Membership Rewards points earned would be tax-free. In reality, the wiring fees were excessive and not deductible as AMEX had advised, as the fees were primarily for personal benefits rather than legitimate business expenses.

Criminal Resolution & Non-Prosecution Agreement with the Eastern District of New York

On the criminal side, AMEX entered into a Non-Prosecution Agreement (NPA) with the U.S. Attorney’s Office for the Eastern District of New York. This agreement addresses AMEX’s involvement in the misleading sales and marketing of its wire products, specifically Payroll Rewards and Premium Wire. As part of the NPA, AMEX will pay a criminal fine of $77.7 million and forfeit $60.7 million in net revenue attributed to these products.

The company has also agreed to a continuing cooperation commitment with the U.S. Attorney's Office for the next three years. In addition to these payments, AMEX’s substantial remedial efforts — such as the termination of 200 employees involved in the misconduct and discontinuation of the products in 2021 — were taken into account in reaching this resolution.

AMEX's total payment to resolve both the civil and criminal claims amounts to $247.4 million. However, due to the credits offered between the civil and criminal settlements, the company will effectively pay $138 million. The Eastern District of New York and the DOJ have agreed to credit approximately $30.35 million of the forfeiture amount and civil penalty to each other's resolutions, reducing AMEX’s financial exposure.

In addition to the DOJ and Eastern District of New York resolutions, AMEX is expected to reach an agreement in principle with its regulators at the Federal Reserve. The penalty resulting from this matter is expected to be finalized in the coming weeks, and AMEX has indicated that this fine is included in the total financial resolution, which is estimated to be approximately $230 million.

Impact & Accountability

These settlements highlight the serious consequences for financial institutions engaging in deceptive practices. “Financial institutions like American Express have no business pitching inaccurate tax avoidance schemes to sell products and turn a quick profit,” said Acting U.S. Attorney Judy Philips. “This resolution ensures that American Express will be held financially accountable for the unacceptable conduct of its sales employees in misrepresenting the tax benefits of these products.”

AMEX's illegal practices affected small businesses, which were misled into believing they were saving money through tax-deductible fees, a claim that was not substantiated by the tax code. As part of the settlement, AMEX will continue to cooperate with investigations into any potential future violations of the law.

The resolution underscores the DOJ’s commitment to holding financial institutions accountable for deceptive marketing and other fraudulent practices that undermine consumer trust and financial integrity.

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