The Consumer Financial Protection Bureau (CFPB) imposed nearly $90 million in combined penalties on Apple and Goldman Sachs, the agency said Wednesday. The fines punish widespread customer service failures and misleading practices affecting Apple Card users. And the Apple Card fines for Apple and Goldman Sachs add up to some serious bank, too.
The enforcement action comes after an investigation revealed “significant breakdowns” in dispute handling and deceptive marketing of interest-free payment plans, CFPB said. Apple and Goldman Sachs didn’t much like the findings but pledged compliance.
Apple objects to $90 million in CFPB fines for it and Goldman Sachs resulting from Apple Card investigation
“Companies illegally mishandled transaction disputes and misled iPhone purchasers about interest-free payment options,” CFPB said in a press release. So Goldman Sachs will pay $64.8 million, including $19.8 million in customer redress and a $45 million penalty. Apple has been ordered to pay a $25 million penalty. Additionally, CFPB barred Goldman Sachs from launching any new credit card products unless it can demonstrate compliance with federal regulations.
CFPB said the investigation uncovered Apple’s failure to forward tens of thousands of customer disputes to Goldman Sachs through its “Report an Issue” feature in the Apple Wallet app. Even when disputes were properly transmitted, Goldman Sachs frequently violated federal requirements by failing to investigate complaints within mandated timeframes or properly communicate with cardholders about investigation outcomes.
“Apple and Goldman Sachs illegally sidestepped their legal obligations for Apple Card borrowers,” said CFPB Director Rohit Chopra. “Big Tech companies and big Wall Street firms should not behave as if they are exempt from federal law.”
‘Strong’ disagreement from Apple, but it and Goldman Sachs comply
Both Apple and Goldman Sachs sent statements, below, to media outlets essentially disagreeing with with CFPB’s findings, but indicating their cooperation.
“Apple is committed to providing consumers with fair and transparent financial products. Apple Card is one of the most consumer-friendly credit cards available, and was specifically designed to support users’ financial health. Upon learning about these inadvertent issues years ago, Apple worked closely with Goldman Sachs to quickly address them and help impacted customers. While we strongly disagree with the CFPB’s characterization of Apple’s conduct, we have aligned with them on an agreement. We look forward to continuing to deliver a great experience for our Apple Card customers.” — Apple statement sent to MacRumors
“Apple Card is one of the most consumer-friendly credit cards that has ever been offered. We worked diligently to address certain technological and operational challenges that we experienced after launch and have already handled them with impacted customers. We are pleased to have reached a resolution with the CFPB and are proud to have developed such an innovative and award-winning product alongside Apple.” — Goldman Sachs statement sent to The Verge
Problems go back to before Apple Card launch
Photo: Apple
The problems began even before the card’s launch in August 2019. Despite warnings from third parties that the dispute system wasn’t ready due to technical issues, the companies proceeded with the rollout. Their partnership agreement included a $25 million penalty for each 90-day delay caused by Goldman, potentially influencing the decision to launch despite known problems.
The CFPB also found that both companies misled consumers about the Apple Card Monthly Installments program. It promised interest-free financing for Apple devices. Many customers were unknowingly charged interest because they weren’t automatically enrolled as expected. And Apple’s website displaying the interest-free payment option only to Safari browser users compounded issues, leaving customers using other browsers without access.
Further complications arose when Goldman Sachs mishandled refunds for more than 10,000 cardholders who had both installment plan balances and regular revolving balances. The bank incorrectly applied refunds from unrelated purchases to interest-free installment balances instead of interest-bearing revolving balances, resulting in unexpected interest charges for customers.
Strained partnership
The Apple Card partnership represented Goldman Sachs’s first major venture into credit card lending, as part of its broader expansion into consumer finance through its Marcus brand. For Apple, the credit card was part of a larger strategy to expand its financial services portfolio, which includes Apple Pay, Apple Cash and Apple Pay Later. But Goldman claimed major financial losses over the arrangement, and rumors swirled about its seemingly inevitable dissolution.
The CFPB’s enforcement action requires both companies to correct their practices and ensure compliance with federal consumer protection laws. Affected customers will receive compensation through the mandated redress program. And the CFPB has established channels for consumers to submit complaints about financial products and services through its website or dedicated hotline.
