Apple and Goldman Sachs have come under intense regulatory scrutiny over the Apple Card, resulting in a substantial $89 million fine issued by the Consumer Financial Protection Bureau (CFPB). The penalty stems from what the CFPB describes as “illegally mishandling transaction disputes and misleading iPhone purchasers about interest-free payment options,” which have affected hundreds of thousands of Apple Card users.
Transaction Dispute Mishandling
The CFPB’s investigation found that Apple failed to send tens of thousands of disputed card transactions to Goldman Sachs in a timely manner. When these disputes were finally processed, Goldman Sachs reportedly did not adhere to federal requirements for investigating them. The mishandling of disputes is a violation of multiple consumer protection laws, which mandate financial institutions to properly investigate transaction issues raised by cardholders.
According to the CFPB, this failure left many cardholders frustrated and without recourse, as Goldman Sachs delayed or completely neglected proper investigation procedures. Federal law requires that disputed transactions be reviewed promptly, and Goldman Sachs failed to meet this standard, exposing it to regulatory action.
Misleading Interest-Free Payment Promises
In addition to the mishandling of disputes, Apple and Goldman Sachs are accused of misleading customers about interest-free financing for Apple products purchased with the Apple Card. Many consumers believed they were automatically enrolled in interest-free payments when purchasing Apple devices, but the CFPB found that some cardholders were still charged interest. This confusion was exacerbated by Apple limiting the visibility of the interest-free financing option, particularly when customers weren’t using Apple’s Safari browser to make purchases.
This lack of clarity led to customers being hit with unexpected charges, which added frustration for those who expected the Apple Card to live up to its promise of being a “consumer-friendly” product designed to improve financial health.
Financial Penalties and Future Oversight
As a result of the investigation, the CFPB has ordered Goldman Sachs to pay at least $19.8 million in customer redress funds and a $45 million civil money penalty. Apple, on the other hand, was slapped with a $25 million fine, which will be directed to the CFPB’s victims’ relief fund.
The CFPB’s order also imposes strict compliance requirements on Goldman Sachs, particularly regarding any future credit card products it may launch. Before introducing any new credit card offerings, the bank must submit a credible plan to the CFPB outlining how it will comply with federal consumer protection laws.
Response from Apple and Goldman Sachs
In response to the penalties, both companies have acknowledged the issues but have attempted to downplay the severity of their misconduct.
In a statement, Goldman Sachs’ Nick Carcaterra expressed satisfaction with the resolution: “We worked diligently to address certain technological and operational challenges that we experienced after launch and have already handled them with impacted customers.” Carcaterra added that Goldman Sachs is proud of the innovative product they developed with Apple, despite the regulatory hiccups.
Apple also issued a statement affirming its commitment to fair and transparent financial products. The company emphasized that it worked closely with Goldman Sachs to address the issues as soon as they came to light and assisted affected customers. However, Apple strongly disagreed with the CFPB’s characterization of its conduct, noting that while the issues were “inadvertent,” it has cooperated fully with the regulator to reach an agreement.
A Strained Partnership?
This regulatory fallout comes at a time when Apple and Goldman Sachs’ partnership appears to be under pressure. Reports suggest that Apple has been exploring the possibility of transferring its Apple Card operations to another financial institution, with JPMorgan reportedly being considered as a successor to Goldman Sachs. This raises questions about the future of Apple’s foray into financial services and whether the challenges it has faced with Goldman Sachs could lead to significant changes in how the Apple Card is managed.
The Apple Card, which was launched in 2019 with the promise of helping customers manage their finances more responsibly, now faces a reputational challenge as its mishandling of customer disputes and payment options has drawn the ire of regulators.
