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AmEx Faces Three-Pronged Federal Investigation Over Card Sales Practices: WSJ

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AmEx Faces Three-Pronged Federal Investigation Over Card Sales Practices: WSJ

American Express Company (NYSE: AXP) is facing an investigation from three separate federal agencies over its business practices for card sales, the Wall Street Journal’s reports. AXP shares dipped as much as 5% on Thursday as the news broke.

What Happened: The United States Treasury Department, the Federal Deposit Insurance Corp., and the Federal Reserve have initiated a probe to determine if sales tactics used by AmEx employees were misleading or aggressive and whether any customers were harmed during the process, says the Journal.

The investigation will look into the conduct of specific employees and ascertain company personnel’s role at a higher level.

The Journal, based on responses from people with knowledge of this matter, says that AmEx is also facing an investigation by the Office of the Comptroller of the Currency over the business-card sales practices.

Why Does It Matter: The federal investigative teams are poring through the company’s compensation plans to figure out if they played a role in encouraging sales personnel to push card sales aggressively. It is also holding discussions with AmEx employees, both current and former.

WSJ also cited an AmEx spokesperson saying the company is cooperating with the investigation. The spokeswoman denied any wrongdoing by the company. She said that “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 Journal’s report in March 2020 highlighted the financial services company’s malpractices to boost card sign-ups.

Price Action: AXP stock closed 0.79% lower at $121.66 on Thursday.

Image Courtesy: Wikimedia

 

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