American Express agreed to pay a $15 million civil monetary penalty as part of a consent order agreement with the Office of the Comptroller of the Currency, the federal agency said in a Tuesday press release.

The credit card company violated OCC’s customer identification program regulations and “recklessly engaged in unsafe or unsound practices” in “a pattern of misconduct,” the OCC said in a related order also issued Tuesday. Specifically, the OCC cited Amex for actions by one of the company’s third-party affiliates, and in connection with its efforts to retain small business clients between 2015 and 2017.

Amex entered into the consent order with the agency without admitting or denying the allegations, and the penalty has been paid, the OCC said in the July 24 order. The agency oversees Amex as it relates to the credit card issuer being a bank.

A spokesperson for Amex offered this statement by email: “The matters covered by the settlement have been fully addressed, including updating card sales policies, enhancing training for sales employees, and providing customer remediation as appropriate.” With respect to the financial impact, the company noted that it created a reserve in a prior period.

In its business, Amex issues its credit cards directly to individual consumers as well as through corporate clients, who in turn have employees use the cards. The New York-based company is the third-largest U.S. credit card company after Visa and Mastercard.

In recent years, payments players, including card issuers, have increasingly zeroed in on small business customers as potential clients. That became especially true in recent years as an increase in U.S. venture capital for private company startups peaked at about $329 billion in 2021, fueling small company development.

The OCC’s order cited Amex “for failing to govern and oversee a third-party affiliate and for violations of regulations relating to certain efforts to retain small business customers.” The agency didn’t identify the affiliate or any of the card companies’ clients. Amex didn’t immediately return a call seeking further comment.

The OCC found that Amex “failed to ensure that its third-party affiliate had appropriate call monitoring controls and appropriate mechanisms to document and track customer complaints,” the release said. It also noted that Amex “failed to collect necessary consumer information and properly maintain and produce records to show compliance with Customer Identification Program regulations.”

Separately, Amex reported last week that the growth of its commercial card business has slowed, with its U.S. small and medium-sized business as well as its U.S. large and global corporate expanding 2% for the second quarter versus last year. Meanwhile, the company’s U.S. consumer card business, which is its biggest segment, grew at a 10% rate, according to the company’s earnings presentation.

By Lynne Marek on July 25, 2023
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