Reports are circulating that the FBI is at an early stage of an investigation involving American Express' rumored price misrepresentation to win client's business. Company's shares dropped as news of the investigation circulates.
According to a report from the Wall Street Journal, American Express recruited clients through a promise of cheap FX conversion rate that later turned out to have been increased without notice.
Amex was rumored to have recruited clients with offers of low-currency conversion rates and they, however, increased the rates without giving warnings to their clients. According to the WSJ, the Office of the Comptroller of the Currency is also reviewing how Amex offered the prices to its customers.
Foreign exchange rip-offs play big parts on some company's business model especially for large parts of the financial service business that includes retail stock market brokers, PayPal, credit cards and the likes.
Shares of the company decrease by 1.2 percent to $105.68 after the news broke out. Amex officially stated in July that they are commissioning a third party that will review the company's foreign exchange business and the commissioned party is expected to fix any of the problems that they can find. They also said during that same statement that the FX International Payments unit is accounted for less than half of a percentage of the company's overall revenue. The third party commissioned for the review is Debevoise & Plimpton LLP.
Amex started the review after it was reported in the Journal that some employees increased exchange rates without notifying the customers. The employees of the company blamed the incident on the commission driven culture practiced within the company.
According to Marina Norville, a spokeswoman for Amex, the company takes those kinds of allegations very seriously and if they found out that they fell short of the mark, they will find solutions to these problems and that they will take appropriate actions to make sure it doesn't happen again.
Norville said that Amex believes that the current transactions are now completed and reported in a fair and transparent manner at the rates that their customers have approval.
The Wall Street Journal reported that Amex began to "scale back on the practice" after reports of the same strategy were used by the Wells Fargo & Co.
According to the WSJ, the FBI is expecting for the company's response to the bureau's inquiries. Norville, however, declined to comment on the report saying that the matter is an on-going law enforcement investigation.
