Amex Slapped With $15m US Fine

July 27, 2023
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The Office of the Comptroller of the Currency has fined American Express $15m alleging the card network failed to oversee a third-party affiliate.

The Office of the Comptroller of the Currency (OCC) has fined American Express $15m alleging the card network failed to oversee a third-party affiliate.

Amex “recklessly engaged in unsafe or unsound practices” and its “practices were part of a pattern of misconduct”, the regulator said in an accompanying consent order.

Between 2015 and 2017, Amex failed to properly govern and oversee the efforts of a third-party affiliate, including call monitoring and documentation processes, and its tracking and monitoring of customer complaints.

Although the OCC document does not name the affiliate, Amex’s spokesperson has confirmed to VIXIO it is Travel Related Services Company (TRS), Amex’s principal operating subsidiary.

The OCC also alleged that Amex failed to gather employer identification numbers for certain small business customers and properly maintain records regarding compliance with customer identification regulations during the same period.

Finally, Amex did not keep records related to its effort to retain small business customers and, later, could not fetch them in response to the regulator’s requests.

According to the OCC, these practices were part of large-scale efforts by Amex to retain small business customers.

Small businesses, along with Millennial and Gen Z consumers, have been a key part of Amex’s recent efforts to broaden the appeal of its products to attract new customers.

The success of this strategy is reflected in the fact that US small and medium-sized businesses (SMEs) drove 25 percent of Amex’s network volume growth in the last quarter and SMEs now account for 83 percent of its billed commercial customers.

Amex neither admitted nor denied the OCC allegations, the order says.

According to the company’s spokesperson, these matters “have been fully addressed, including updating card sales policies, enhancing training for sales employees, and providing customer remediation as appropriate”.

The OCC is the banking regulator of national banks in the US. As a US national bank chartered by the OCC, Amex is subject to the OCC’s examination exercise.

The spokesperson said Amex had fully reserved for the penalty in a prior period.

In addition to the OCC investigation, Amex is under scrutiny by the Department of Justice (DOJ) and the US Attorney’s Office for the Eastern District of New York (EDNY), the company’s annual report shows.

Amex has received a grand jury subpoena from the US Attorney which also involved its historical sales practices relating to small business customers.

Past matters with US regulators

This is not the first time Amex has got into the crosshairs with regulators over failure to properly handle its third-party relationship with TRS.

In 2012, Amex agreed to pay a combined $27.5m fine and $85m in restitution to settle cases with the OCC, the Federal Reserve Board (Fed), the Federal Deposit Insurance Corporation (FDIC) and the Consumer Financial Protection Bureau (CFPB).

In that case, the regulators alleged the debt collection practices of TRS were deceptive and Amex failed to properly manage its vendor relationship.

Last July, Amex was also found in breach of US Kingpin sanctions and was handed a $430,500 fine.

The Treasury alleged Amex processed $155,190 worth of transactions for an account whose supplemental card holder was designated in connection with illegal drug distribution and money laundering.

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