IMHO, I think most recons are a hard pull. At least expect it then be grateful when not. As to them telling you they wouldn't if you faxed it over, kind of crappy.
I don't get why you are upset about this. It is common knowledge that lender doesn't accept faxed over credit report. They will pull a credit report on their own regardless. It is also a common knowledge that recon will nets you another HP. In fact you are lucky, considering that AMEX doesn't do recon 99% of the time.
You should have waited the denial letter and see the denial reason (most likely high internal risk score).
I would not imagine they would accept a faxed over report. Like the representative said, you could have altered it. Citi did accept one from me with no hard pull but I was fully expecting one.
Most of the time you should just always expect one and be happy if it did not cause one. Utilisation being high would not be the report being innacurate. In any case, I would just move one. Most of the time inquiries will not be removed and I have experienced that most companies do not care about them anyway.
CSRs are very frequently misinformed about credit, inquiries, etc.....Regardless of what they tell you, always expect a HP, but be pleasantly surprised if it happens to be a soft pull.