American Express is reportedly under investigation by a top federal agency exploring allegations of unethical sales tactics by the company’s small-business credit card sales representatives.
The Office of the Comptroller of the Currency is reviewing claims that some Amex employees misled small-business owners when signing them up for cards, according to The Wall Street Journal.
The review seeks proof that some small-business owners were tricked into signing for cards they didn’t want, in addition to receiving cards with fees and rates they didn’t expect. A civil investigation is underway involving cards issued to businesses that previously had an Amex card cobranded with Costco, the Journal said.
Amex lost the Costco card business to Citigroup in June 2016. Questions surround whether Amex employees failed to keep records of all sales calls and whether they improperly obtained customers’ personal information to sign people up for cards, said the Journal in its report, which previously looked into shady Amex business practices within the past year.
“We have robust compliance policies and controls in place, and do not tolerate misconduct,” Amex said in a statement to PaymentsSource. The OCC said it would not comment on supervisory matters pertaining to specific banks.
The timing of the federal investigation is tough for Amex, which has been hammered on other fronts during the pandemic. It is a key issuer of travel-and-entertainment credit cards, and its spending volume collapsed last year as consumers were forced to stay home.
Amex’s stock dipped briefly on Thursday after the Journal’s publication of its article.
Consumer advocates are closely watching for companies that could be operating under unusual conditions or duress during the pandemic.
“I think many companies are so large that one hand doesn’t always know what the other is doing and that can result in some unfortunate issues,” Linda Sherry, director of national priorities at Consumer Action, said in an interview with PaymentsSource.
The nonprofit organization has paid close attention to the credit card industry for years, where merchants have complained about burdensome interchange rates.
“We’ve heard for years that from different business entities that American Express cards are some of the most expensive they can accept,” Sherry said.
But American Expresss’s business practices haven’t been a recent focus for Consumer Action, which is based in Washington.
“We also hear that Amex has a great small-business program that helps entrepreneurs get feet coming through the door,” Sherry said.
The company’s model relies on expanding its business card portfolio, but it also needs those businesses to stick around, analysts point out.
“The small-business credit card industry is highly competitive and the whole purpose of selling a card is to expand the relationship,” Brian Riley, head of credit advisory at Mercator Advisory Group, told PaymentsSource. “There might be some bad apples at the company, but Amex is engineered for the business credit card to be a foothold to using the company’s full range of treasury, deposit and payment services.”
Regulators would likely be looking to determine whether any unethical practices were widespread, said Ali Raza, senior vice president of FSS Technologies USA.
“Federal agencies would focus on any misleading or deceptive communications, including whether small businesses were promised anything in return,” Raza said.
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