Federal Investigators Probing AmEx Card Sales Practices
January 07 2021 - 12:46PM
Dow Jones News
By AnnaMaria Andriotis
Federal investigators are probing business-card sales practices
at American Express Co., according to people familiar with the
matter.
The inspectors general offices of the Treasury Department,
Federal Deposit Insurance Corp. and Federal Reserve are
investigating whether AmEx used aggressive and misleading sales
tactics to sell cards to business owners and whether customers were
harmed, the people said. They are also examining whether specific
employees contributed to the alleged behavior and if higher-level
employees supported it, some of the people said.
The Office of the Comptroller of the Currency is also
investigating business-card sales practices at AmEx, according to
people familiar with the matter.
More than a dozen current and former AmEx employees previously
told The Wall Street Journal that some salespeople strong-armed or
misled small-business owners into signing up for cards to boost
sales numbers. Some salespeople misrepresented card rewards and
fees, or issued cards that customers hadn't sought, they said. An
AmEx spokesman said at the time that the company had found only a
very small number of problems, which were resolved "promptly and
appropriately," including through disciplinary action.
"We have robust compliance policies and controls in place, and
do not tolerate misconduct," an AmEx spokeswoman said this
week.
The civil investigation by the inspectors general offices is in
early stages, according to some people familiar with the matter.
The federal authorities have been staffing up investigation teams
and have spoken with current and former employees, they said. They
are also reviewing whether the company's compensation plans
encouraged salespeople to cut corners, they said.
Spokespeople for the inspectors general offices at the Treasury,
FDIC and Fed declined to comment.
The AmEx spokeswoman said that since last spring, "we have been
cooperating with a regulatory review of small business card sales
between 2015 and 2016."
"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 spokeswoman said. "We take these
matters seriously, and will continue to cooperate with our
regulators."
The previous Journal article focused on sales practices within
the team that places calls to sell cards to small businesses. The
spokeswoman said this group's sales "represented approximately 0.25
percent of the 65 million total new cards American Express acquired
world-wide between 2014 and 2019."
The OCC's investigation involves cards issued to business owners
to replace their co-branded AmEx- Costco cards, according to people
familiar with the matter. Costco Wholesale Corp. decided in 2015 to
end its long-running partnership with AmEx, and AmEx launched an
aggressive campaign to keep those customers.
The OCC, an independent branch of the Treasury, has been
examining whether the problematic sales practices continued,
according to some of the people familiar with the matter.
An OCC spokesman declined to comment.
After Wells Fargo & Co. disclosed a fake-accounts scandal in
2016, the OCC asked AmEx and other banks to review their sales
practices. AmEx conducted a review and told the OCC it found few
cases of inappropriate sales tactics, the Journal previously
reported.
A whistleblower complaint filed with the OCC early last year
said AmEx understated the number of problematic sales calls it
reported to the OCC. According to the complaint, the company
excluded some of the calls where AmEx employees tried to retain
business-card holders who had been using AmEx-Costco business
cards.
The complaint, which was reviewed by the Journal, also alleged a
conflict of interest in how AmEx's internal review was conducted.
It said AmEx recruited a small number of employees in the sales
division to help with the OCC-requested review. Those employees
were told that the future of the sales division depended on the
outcome of the review, the complaint said.
The investigation by the inspectors general offices is probing,
among other issues, whether employees made sales calls that weren't
recorded, some of the people said. The investigators are also
looking into how salespeople used customers' personal information
to make sales, these people said.
Current and former employees previously told the Journal that
some salespeople in the Phoenix office placed calls from personal
cellphones, and that senior managers sometimes closed sales on
their unrecorded desk lines. Current and former employees also
previously told the Journal 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.
Write to AnnaMaria Andriotis at annamaria.andriotis@wsj.com
(END) Dow Jones Newswires
January 07, 2021 12:31 ET (17:31 GMT)
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