American Express is under federal investigation for 'using aggressive and misleading sales tactics to sell cards to business owners'
Federal investigators are probing business-card sales practices at American Express, the Wall Street Journal reported on Thursday, citing people familiar with the matter.
The investigators are looking into whether AmEx allegedly 'used aggressive and misleading sales tactics to sell cards to business owners and whether customers were harmed,' according to the report.
A spokesman for AmEx said the company had been cooperating with a regulatory review of small business card sales between 2015 and 2016 since spring, but declined to give further details including about the regulators involved.
'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,' the spokesman said in an email.
Federal investigators are probing business-card sales practices at American Express. The investigators are looking into whether AmEx (file image) allegedly 'used aggressive and misleading sales tactics to sell cards to business owners and whether customers were harmed'
The business units responsible for these sales represented about 0.25 per cent of the 65 million total new cards AmEx acquired worldwide between 2014 and 2019, the statement said.
The Inspector General's office at the Treasury Department, the Federal Deposit Insurance Corp and the Federal Reserve are also examining whether specific employees contributed to the alleged behavior and if higher-level employees supported it.
More than a dozen current and former AmEx employees previously told the Journal that some salespeople misled small-business owners into signing up for cards to boost sales numbers.
The workers claimed that some salespeople 'misrepresented card rewards and fees'. They also said salespeople would issue cards that customers didn't ask for.
Employees told the Journal in March 2020, that the company had dabbled in dodgy sales tactics since at least 2015. At the time, AmEx was trying to retain Costco's small-business customers after the warehouse club ended their 16-year partnership.
During their contract, Costco didn’t accept credit cards in its stores from any company but AmEx.
AmEx took a major loss after the partnership with Costco ended and that's allegedly when AmEx launched an aggressive campaign to keep Costco customers who owned businesses.
That's when a team of about 100 salespeople out of Phoenix were tasked with calling up Costco-business card holders and convincing them to sign up for AmEx business cards, according to the Journal.
More than a dozen current and former AmEx employees (file image) previously claimed that some salespeople misled small-business owners into signing up for cards to boost sales numbers
The strategy worked and within six months of its start, some salespeople had earned commissions of $50,000 to $100,000, current and former employees told the Journal.
In addition, the push is alleged to have led salespeople to cut corners. Officials said they are reviewing whether the company’s compensation plans encouraged salespeople such alleged behavior.
For example, the investigation by the inspectors general offices is probing whether employees made sales calls that weren’t recorded, as current and former AmEx employees claimed. It is also alleged that managers would make calls from their personal phones.
They are also investigating how salespeople used customers' personal information to make sales.
According to the Journal, employees claimed that some salespeople pulled Social Security numbers and addresses from customer databases to submit card applications on behalf of business owners who didn’t always want them.
In a statement, an AmEx spokeswoman said: 'We have robust compliance policies and controls in place, and do not tolerate misconduct.'
The Office of the Comptroller of the Currency is also investigating business-card sales practices at the company, the report said, citing people familiar with the matter.
The OCC's investigation is focused on cards issued to business owners to replace their co-branded AmEx Costco card.
The Federal Deposit Insurance Corp and the Federal Reserve did not immediately respond to Reuters' requests for comment.
A spokesman for the OCC declined to comment, while the Treasury Office of Inspector General said, 'it could neither confirm nor deny the existence of investigations'.
Shares of AmEx were down 3.7 per cent at $117.95.