The headlines surrounding the American Express settlement trumpet that the credit card giant is paying $138 million to rectify concerns over niche products intended for small and mid-sized businesses. What the headlines don’t mention is that the company took steps to resolve this issue long before federal authorities became involved. Amex not only discontinued the problematic services in 2021, but also fired members of the team responsible for them.
Here’s what happened: In 2018, American Express launched Payroll Rewards, which allowed business customers to fulfill their payroll via a direct payment from an Amex account. Amex charged a percentage-based fee based on the size of the wire, even though its competitors offered similar wiring services for nominal fees or even for free.
Small- and mid-sized businesses were told that if they used Payroll Rewards, the fees from the payments were tax-deductible as a business expense. Without the Amex services, customers were told they would have had to pay taxes on the fees.
Premium Wire was a follow-up product that allowed customers to make wire payments beyond just payroll use cases. According to a statement from the IRS, the marketing for both products relied on incorrect tax advice—namely, that the wiring fee was deductible as a business expense.
But as the IRS acknowledged, American Express recognized the problems with the two products very quickly. In early 2021, the company launched an internal investigation and ultimately fired around 200 employees connected to the products. By the summer of 2021, Amex had stopped enrolling new customers in the wire services, and by November of that year, the products were discontinued entirely.
“They Wanted to Do the Right Thing”
As part of the agreement, American Express will not face any prosecution. The non-prosecution agreement notes that the company voluntarily took substantial measures to mitigate and correct the deceptive sales and marketing practices around the two products.
In a statement, Amex said it “took decisive voluntary action to address these issues, including discontinuing certain products several years ago, conducting a comprehensive internal review, taking appropriate disciplinary measures, making organizational changes, and enhancing policies, compliance, and training programs.”
In addition to law enforcement, industry observers also appreciated the way American Express addressed the incident.
“American Express looks like they handled this properly right from the beginning,” said Brian Riley, Co-Head of Payments at Javelin Strategy & Research. “It was an isolated incident, and from what we’ve seen, they’ve been forthright in cooperating with the investigation. It’s clear they wanted to do the right thing.”
