The U.S. Consumer Financial Protection Bureau (CFPB) has ordered Goldman Sachs and Apple to pay $89 million in penalties due to significant mishandling of their Apple Card partnership. As part of the fallout, Goldman Sachs has been temporarily banned from issuing new credit cards, marking a significant blow to both companies. The CFPB’s investigation uncovered unresolved customer disputes and, in some cases, incorrect credit reports, underscoring serious flaws in the companies’ credit card management practices.
Mishandling of Disputes and Credit Reports
One of the CFPB’s primary findings was Apple’s failure to notify Goldman Sachs of tens of thousands of Apple Card charge disputes. When Apple did relay disputes to the bank, the CFPB determined that Goldman Sachs did not follow several federal regulations for properly investigating and resolving these issues. As a result, many customers were left with unresolved disputes, some of whom suffered damage to their credit scores due to inaccurate information being reported.
The CFPB also criticized both companies for launching the Apple Card before the system was fully prepared to handle customer complaints and disputes. The bureau noted that despite warnings from third-party sources, the companies moved forward with the launch, leading to technological problems that directly affected consumers. “These failures meant that consumers faced long waits to get money back for disputed charges, and some had incorrect negative information added to their credit reports,” the CFPB stated.
Misleading Interest-Free Payment Plans
Another key issue raised by the CFPB was the misleading promotion of Apple Card’s interest-free payment plans for Apple products, including iPhones. Apple had heavily marketed the card’s lack of fees, such as annual fees, over-the-limit fees, and foreign transaction fees, but many purchases still accrued interest. This misrepresentation left some customers under the false impression that they would not incur interest charges when making purchases with the card.
Responses from Apple and Goldman Sachs
In response to the CFPB’s findings, both Apple and Goldman Sachs issued statements. Apple disagreed with the CFPB’s characterization of its conduct but acknowledged the agency’s order. “Apple Card is one of the most consumer-friendly credit cards available, and was specifically designed to support users’ financial health,” an Apple spokesperson said. “Upon learning about these inadvertent issues years ago, Apple worked closely with Goldman Sachs to quickly address them and help impacted customers.”
Goldman Sachs also expressed relief at reaching a resolution with the CFPB. “We worked diligently to address certain technological and operational challenges that we experienced after launch and have already handled them with impacted customers,” a spokesperson for Goldman Sachs said. The bank was fined $45 million and will pay $20 million in customer redress, while Apple faces a $25 million fine.
Temporary Ban on New Credit Cards for Goldman Sachs
In addition to the financial penalties, the CFPB imposed a temporary ban on Goldman Sachs, preventing the bank from launching new credit card products unless it can provide a credible plan demonstrating that future products will comply with legal standards. This ban marks a significant setback for Goldman’s consumer banking ambitions, which have already suffered this year following the end of its credit card partnership with General Motors.
Goldman’s consumer business has faced struggles since its initial foray into retail banking with the launch of Marcus, an online platform offering personal loans and credit card products. The Apple Card, introduced in 2019 and backed by the Mastercard network, had initially been a major part of Goldman’s consumer lending strategy. However, technological and operational issues have plagued the partnership, culminating in this latest regulatory action.
Apple Card and Goldman’s Ongoing Partnership
Despite these setbacks, Apple and Goldman Sachs have continued to expand their financial offerings. In April 2023, Apple announced a high-yield savings account for Apple Card holders, providing a 4.15% annual yield through Goldman Sachs. This new feature allows users to deposit their cash back rewards and other savings, reinforcing the financial partnership between the tech giant and the bank.
The CFPB’s $89 million fine against Goldman Sachs and Apple highlights the critical need for thorough oversight in financial product launches, especially when they involve high-profile partnerships. As both companies work to address the fallout from this investigation, the case serves as a reminder of the importance of regulatory compliance and consumer protection in the fast-evolving landscape of digital finance.
