If there’s a regulatory body that’s been busier this week than the Consumer Financial Protection Bureau (CFPB), we’d be hard-pressed to name it.
Having just issued its final rule on open banking and data sharing on Tuesday, the CFPB said Wednesday (Oct. 23) that it would fine Apple and Goldman Sachs more than $89 million for alleged customer service violations tied to the Apple Card.
Goldman will pay $19.8 million in what the CFPB termed “redress” in its announcement of the enforcement action and a $45 million fine. Apple will pay a $25 million fine, the announcement detailed.
Beyond the monetary impact: Goldman Sachs cannot launch new cards — unless it can prove to regulators that the cards are in sync with federal law.
In a statement provided to PYMNTS, Goldman Sachs spokesperson Nick Carcaterra said, “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.”
An Apple spokesperson told PYMNTS via e-mail late Wednesday that “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.”
The CFPB’s investigation into Apple Card stretches back over two years; Goldman is, of course, exiting the Apple Card partnership. And as reported just last week, the Wall Street powerhouse will stop being the issuer of the General Motors GM Rewards Mastercard.
The CFPB, in its Wednesday Apple consent order filing, alleged that the two companies were tied to “customer service breakdowns and misrepresentations that impacted hundreds of thousands of Apple Card users.” The CFPB stated in its action that Apple did not send Goldman details on thousands of customer disputes; even when it did provide information on disputes, Goldman did not review them in keeping with applicable law.
“When consumers disputed Apple Card transactions via Apple’s Report an Issue functionality by completing an initial form, the disputes were initially sent to Apple, which was supposed to send them to Goldman for investigation. Beginning in June 2020, in tens of thousands of instances, Apple failed to do so,” the CFPB wrote.
The consequence, according to the Bureau, was that consumers did not get refunds in a timely manner. Other cardholders saw damage to their credit reports, as Goldman reported those consumers to credit agencies.
For disputes that did reach Goldman Sachs, the bank failed to meet federal requirements, including sending timely acknowledgment notices, conducting reasonable investigations or providing resolution letters within 90 days. These failures resulted in consumers facing incorrect negative credit reporting and being held responsible for potentially fraudulent charges.
The CFPB also charged that the companies “misled” consumers about payments for Apple products — claiming that the payments were interest free when in fact interest charges were applied. The interest-free payment options were presented only when users opted to buy the Apple offerings while using Apple’s Safari browser.
“Through at least July 2020, the checkout process … presented consumers purchasing iPhones with an option to ‘Pay in full’ or ‘Pay monthly.’ The checkout process did not explain that ‘Pay monthly’ referred to [Apple Card Monthly Installments], or provide further details about ACMI, until after consumers selected this option,” the CFPB added.
According to the CFPB, the companies allegedly proceeded with the Apple Card launch in August 2019 despite warnings to Goldman’s board of directors that critical dispute systems were “not fully ready” due to technological issues. The partnership agreement had incentivized an early introduction by giving Apple the right to impose a $25 million penalty for each 90-day delay caused by Goldman, as detailed in the consent order against Goldman Sachs.
The enforcement action cites violations of both the Consumer Financial Protection Act and the Truth in Lending Act. The penalties will be paid into the CFPB’s victims relief fund.
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