Cagey Consumer


Can You Trust American Express?

American Express is well known for its financial and travel services, such as its credit card and travelers check products. The familiarity and trustworthiness associated with its name has allowed it to expand into related businesses.

In October 1999, that's what they did, by opening American Express Brokerage, attracting many new accounts by its promise of free online trading for qualified accounts.

In normal times, one might wonder how a brokerage firm could make money without charging any commissions. But at a time when other brokerages were offering 25,000 frequent flyer miles or $400 in merchandise, sometimes for accounts with as little as $1000 in assets, this offer didn't seem out of line. Nevertheless, there was reason to believe such a business model might be viable:

reduced costs due to online transactions
With very small marginal costs for online transactions, it begins to make sense to eliminate commission charges as a barrier to obtaining customers.

kickbacks from securities markets
Brokers are frequently offered a fee for directing orders to a particular market. This is done only when the order can be executed at the best current price, and it's not a large amount. But with low transaction costs, it can provide a profit on a commission-free trade.

relationship marketing
The primary incentive for offering commission-free trades is to have the opportunity to offer customers other products and services that will provide a profit to American Express.

Nevertheless, American Express Brokerage began to put restrictions on the free trading, such as by imposing commissions on day-trading and by disallowing free trading when such activity becomes "excessive".

In September 2000, they finally announced that they would restrict the number of free trades per month to either 3 or 10 (depending on account size) and would not allow any free "limit" orders. They claimed the right to do this based on a provision in the account agreement that allows them to change any of the terms at will.

In their defense, it should be pointed out that there's no charge to open an account, and customers who received both free buys and sells had not paid legal "consideration" necessary to make a contract be binding, although the customers certainly incurred their own time, and possibly some out-of-pocket costs, to open accounts at American Express.

So customers unhappy with the new commission schedule could simply close their accounts without incurring any additional expense, right? Well, not quite. Closing an account and transferring it to another broker incurs a processing fee of $50 (subject to change at the whim of American Express). American Express has refused to waive this fee in spite of the effective recission of their contractual obligations.

Given the egregious behavior of American Express Brokerage, is it reasonable to think that other subsidiaries of American Express will live up to their committments?

Listed below are other web pages describing questionable practices by American Express and its subsidiaries:

American Express Lies
Message forum to discuss American Express lies

ameXsuX.com
The Unofficial American Express Consumer Opinion Web Site

American Express Publishing Settlement ( alternate link)
American Express enters into a consent decree regarding sweepstakes disclosures.

Boycott American Express Moneygram Division

American Express Customer Abuse (from the wayback archive)

American Express Public Forum (traveldesk.com)
Read other opinions of American Express.

We Don't Take American Express
American Express loses a merchant account because it refuses to apologize for the erroneous accusations it made.

American Express and the Truth About Customer Privacy
The fact that American Express doesn't control what happens to the personal information that it turns over to credit bureaus makes a mockery of its stated privacy policy.

Bogus American Express Gold Card Offer
This is an example of how lies become accepted as truth. Being pre-approved should mean you were approved before you asked for approval. But it really means you could be approved, which of course means nothing. Now that people have figured that out, they increase the level of lying and tell us we've been actually approved to get our attention, but then they tell you that the offer is still subject to approval.

American Express Announces American Express Brokerage
American Express makes a promise.

American Express Brokerage Pricing Changes
American Express breaks a promise.

Unlimited Free Trading Hits Limits (thestreet.com,10/10/2001)
Another version of the same fraud, as told by thestreet.com.

American Express Changes Fees (Motley Fool, 9/27/2000)
The Fools question management competence at American Express.

American Express Card Bulletin Board (ugetheard.com)
Public forum about the American Express card.

Avoid American Express
More reasons to avoid American Express at edumacation.com.


 

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Updated May 17, 2003