Apple and Goldman Sachs hit with $90 million penalty over Apple Card

Posted:
in General Discussion edited October 23

The Consumer Financial Protection Bureau has ruled that Apple was not ready for Apple Card disputes, and tens of thousands were then not dealt with properly by Goldman Sachs.

Apple Card
Apple Card



Credit firm Goldman Sachs was already losing millions over Apple Card, and is certain to take a hit of a few more millions when it finally gets out of its unhappy marriage with Apple. But now it is also being hit with penalties -- and Goldman Sachs is no longer allowed to launch new any new credit card.

The Consumer Financial Protection Bureau (CFPB) has announced that together Apple and Goldman Sachs over issues it says affected hundreds of thousands of Apple Card customers. Specifically, Apple failed to send the details of tens of thousands of disputed transactions to Goldman Sachs -- and then the finance firm failed to follow federal investigation requirements.

"Apple and Goldman Sachs illegally sidestepped their legal obligations for Apple Card borrowers. Big Tech companies and big Wall Street firms should not behave as if they are exempt from federal law," said CFPB Director Rohit Chopra. "The CFPB is banning Goldman Sachs from offering a new consumer credit card unless it can demonstrate that it can actually follow the law."

Reportedly, consumers faced long waits for disputed charges to be refunded, and some of them had their credit status affected. The CFPB notes that third parties had warned Goldman Sachs ahead of the launch that Apple's dispute systems were inadequate.

Apple's systems were sufficiently inadequate that users were not always shown an interest-free payment option when one was available. This led, says the CFPB, to Apple effectively misleading customers who believed they would automatically get interest-free payment plans, and so had charges imposted.

Given that Goldman Sachs ignored the warnings and also in particular because it did not follow federal rules over disputes, the CFPB has banned the finance firm from launch any new credit card. It will lift that ban, though, if Goldman Sachs can provide a credible plan that it will comply with the law.

Goldman Sachs must pay at least $19.8 million in redress, and also a $45 million civil money penalty.

Apple itself is not off the hook. The company must pay a $25 million civil penalty.

Goldman Sachs already regretted consumer credit partnerships



The ban on launching a new credit card is an embarrassment for Goldman Sachs, but probably not a difficulty. The ban is specifically against consumer credit cards, and Goldman Sachs has been working to get out of the consumer business entirely.

Goldman Sachs invested heavily in consumer products, and not only with Apple. It had a similar partnership with General Motors, and is currently in the process of dissolving the partnership with GM.

On Apple's part, the Apple Card program has failed to expand overseas despite Tim Cook's own commitment to expansion at launch in 2019. Apple did, however, expand its partnership with Goldman Sachs in order to launch Apple Savings in 2023.

However, Apple Savings and Apple Card have reportedly been an expensive failure for Goldman Sachs. One Goldman Sachs executive is said to have commented that "we should never have done this f****** thing."

Neither Apple nor Goldman Sachs have yet commented on the CFPB's conclusions.




Read on AppleInsider

Comments

  • Reply 1 of 10
    mpantonempantone Posts: 2,231member
    Good for the CFPB the fine is justly assigned.

    While I wasn't the victim of fraud I have certainly suffered poor customer service using Apple Card.

    I made two small transactions when I got my card (September 2019) and when I tried to pay, the app was unable to process my linked checking account (the same one I use to pay off other cards, my property tax bill, healthcare premiums, utilities, etc.). Ultimately I ended up on a 45+ minute phone call with Goldman Sucks customer service which included me verbally reciting my bank's routing and account number to pay off the balance due. I have never had to do that before in three plus decades of owning credit cards.

    I ended up with an Apple Cash Rewards balance of $0.15. I never made a single transaction after.

    Then a year ago Goldman Sucks cancelled my Apple Card yet left my account open. And then bizarrely they started snail mailing monthly statements. God knows what it costs to do this but paper, printing, envelopes and postage aren't free.

    Obviously I am not the only person who has received poor customer service from Goldman Sucks and the CFPB's findings uncovered even worse transgressions. This is why we have consumer protection laws.

    Shame on Apple for picking such a poor financial institution as a partner. It's no surprise that Goldman Sucks is in the midst of exiting the entire consumer finance business.

    Of course no financial institution is perfect, they have all made mistakes. Well, some mistakes aren't free. There are regulations that prevent banks from being slobs.

    The rest of the consumer finance world (and not just US domestic) is probably well aware of Apple and Goldman Sucks' struggles. It may be a contributor as to why Apple Card -- after five years -- is still a US-only service. No other bank in the world has agreed to partner with Apple to bring Apple Card to their market.

    Anyhow, I look forward to receiving my next mailed paper statement from GS in a couple of weeks. Keep draining your bank account sending me deadtrees documents. Loving it!
    edited October 23 avon b7muthuk_vanalingamNormDIYdewmewilliamlondon
  • Reply 2 of 10
    mpantone said:
    Good for the CFPB the fine is justly assigned.

    While I wasn't the victim of fraud I have certainly suffered poor customer service using Apple Card.

    I made two small transactions when I got my card (September 2019) and when I tried to pay, the app was unable to process my linked checking account (the same one I use to pay off other cards, my property tax bill, healthcare premiums, utilities, etc.). Ultimately I ended up on a 45+ minute phone call with Goldman Sucks customer service which included me verbally reciting my bank's routing and account number to pay off the balance due. I have never had to do that before in three plus decades of owning credit cards.

    I ended up with an Apple Cash Rewards balance of $0.15. I never made a single transaction after.

    Then a year ago Goldman Sucks cancelled my Apple Card yet left my account open. And then bizarrely they started snail mailing monthly statements. God knows what it costs to do this but paper, printing, envelopes and postage aren't free.

    Obviously I am not the only person who has received poor customer service from Goldman Sucks and the CFPB's findings uncovered even worse transgressions. This is why we have consumer protection laws.

    Shame on Apple for picking such a poor financial institution as a partner. It's no surprise that Goldman Sucks is in the midst of exiting the entire consumer finance business.

    Of course no financial institution is perfect, they have all made mistakes. Well, some mistakes aren't free. There are regulations that prevent banks from being slobs.

    The rest of the consumer finance world (and not just US domestic) is probably well aware of Apple and Goldman Sucks' struggles. It may be a contributor as to why Apple Card -- after five years -- is still a US-only service. No other bank in the world has agreed to partner with Apple to bring Apple Card to their market.

    Anyhow, I look forward to receiving my next mailed paper statement from GS in a couple of weeks. Keep draining your bank account sending me deadtrees documents. Loving it!
    Given my recent experiences with Apple "support", I would say it is a match made in Heaven.
  • Reply 3 of 10
    entropysentropys Posts: 4,297member
    Some things look like just plain bad service, but not passing on an incomplete form? Get out of here!
  • Reply 4 of 10
    jas99jas99 Posts: 167member
    I have had excellent experiences with the Apple Card.

    I have successfully used the text based support the very few times in the many years that I’ve had this card that I needed it.

    I guess I am one of the very, very happy customers of the Apple Card, Apple Pay, etc.
    zeus423pslicewatto_cobra
  • Reply 5 of 10
    I wouldn't buy a computer from Visa... and no-one should have tried an Apple credit card. I knew better...
    williamlondon
  • Reply 6 of 10
    mpantonempantone Posts: 2,231member
    stevenoz said:
    I wouldn't buy a computer from Visa... and no-one should have tried an Apple credit card. I knew better...
    Let's get some misconceptions corrected here.

    First of all, you don't buy a computer from Visa. Nor Mastercard. Nor American Express. Nor Diners Club.

    Visa and Mastercard are payment networks. The issuing bank is printed somewhere on the statement. For the Apple Card, it is Goldman Sachs Bank, NA. American Express is both the issuing bank and a payment network.

    When you buy something with a Visa branded credit card, you don't owe Visa anything. You owe the issuing bank. This is all carefully described (by strict US consumer banking regulations) in the fine print of the cardholder agreement.

    If you need further explanation, please contact the customer support desk of your issuing banks (the phone number is printed on the back) or in the case of Apple Card, the customer support contacts through the Apple Wallet app. If you are going to use credit cards -- not just Apple Card -- you should understand the fundamentals of how consumer credit cards work.

    Consumer protection regulations are very strict in the USA, particularly for consumer banking. This penalty is the result of these two companies not doing enough to ensure proper handling of financial transaction. It is important to understand that all of these financial institutions (not just Goldman Sucks or Apple) have periodically made mistakes. No one is perfect. These regulations are set up to protect Joe Consumer otherwise financial institutions would be very lax about handling your money.
    edited October 23 bala1234pslicemuthuk_vanalingamdewmegatorguywilliamlondon
  • Reply 7 of 10
    dewmedewme Posts: 5,724member
    This is a scenario where I have to ask myself: Why Apple is even in this business in the first place?

    There are obviously financial and efficiency benefits for Apple to be involved in adjacencies that help promote and push the products they make, like iPhones and Macs, out the door and into consumer’s hands. My concern is that Apple (or any other new age conglomerate) is putting their hard-earned reputation and brand value at risk by jumping into areas that are outside of their core expertise and sphere of influence.

    We’ve already seen that Apple already takes a reputational hit whenever something negative happens in their outsourced manufacturing and supplier channels, even down to the point of raw materials being dug out of the earth. Teaming up with a financial institution like Goldman Sachs is no less a source of reputational risk because Apple is exposed by virtue of putting their name on what ends up in consumers hands, which in this case is a credit card and all of the associated services behind it.

    I have more than a bit of experience seeing GE doing similar things in terms of heavily leveraging their brand and reputation in areas that they really could not control, including the toaster example mentioned above. GE sold their brand to anyone who wanted to leverage it to sell their non-GE products. GE is probably the worst possible case scenario in terms of diluting brand value, but it is a big fat example of what not to do when your business is totally driven by the bottom line and Wall Street expectations and so much is riding on your brand value. 
    williamlondon
  • Reply 8 of 10
    jcs2305jcs2305 Posts: 1,340member
    stevenoz said:
    I wouldn't buy a computer from Visa... and no-one should have tried an Apple credit card. I knew better...

    I use my Apple card for my iPhone, Apple services and some other streaming and misc services monthly. I have purchased 4 iPhones and have used the card this way for years now.

    I view the app when the payment is due I move the payment from my checking via my debit card to Apple cash and then I pay the Apple card balance in full.
    watto_cobra
  • Reply 9 of 10
    mpantonempantone Posts: 2,231member
    dewme said:
    This is a scenario where I have to ask myself: Why Apple is even in this business in the first place?

    There are obviously financial and efficiency benefits for Apple to be involved in adjacencies that help promote and push the products they make, like iPhones and Macs, out the door and into consumer’s hands. My concern is that Apple (or any other new age conglomerate) is putting their hard-earned reputation and brand value at risk by jumping into areas that are outside of their core expertise and sphere of influence.
    Apple may be revisiting the same question internally. After five years Apple Card remains solely a US-only offering. And if another issuing bank takes over Apple Card will that financial institution agree to all of Apple's demands? One thing for sure Jamie Dimon at JPMorganChase won't.

    If Apple Card gets taken over by another bank, most likely the cardmembers will see fewer benefits and flexibilities that they have enjoyed. One thing that is definitely going away is the absence of fees.

    Apple partnered with a financial institution knowing that US consumer banking laws are much more strict than those governing consumer technology and invite much heavier regulatory scrutiny. This fine is a clear indicator that Apple cannot hide behind a bank and say "it's their fault." Apple is partially responsible for these banking processes because they handle the Apple Pay side of things.

    My guess is this fine will invite further regulatory scrutiny. Any other countries that are interested in Apple Card will also remember this. If Apple Card debuted in another country, they will have to deal with that country's agencies.

    We have already seen how different regulations are complicating Apple's efforts. Apple Intelligence is not coming to the EU next week.

    My guess is there is a 50-50 chance that Apple Card's features will get watered down over time to the point where it ends up just being an Apple-branded card that offers a slightly higher discount on Apple purchases with everything else being similar to comparable cards from other banks. Sure, if you want to save another ten bucks when you buy a $999 iPhone or Mac, pull out your Apple Card (2029 version) otherwise you might just want to use some other bank's card.
    edited October 24 dewmemuthuk_vanalingam
  • Reply 10 of 10
    cmfcmf Posts: 67member
    mpantone said:
    dewme said:
    This is a scenario where I have to ask myself: Why Apple is even in this business in the first place?

    There are obviously financial and efficiency benefits for Apple to be involved in adjacencies that help promote and push the products they make, like iPhones and Macs, out the door and into consumer’s hands. My concern is that Apple (or any other new age conglomerate) is putting their hard-earned reputation and brand value at risk by jumping into areas that are outside of their core expertise and sphere of influence.
    Apple may be revisiting the same question internally. After five years Apple Card remains solely a US-only offering. And if another issuing bank takes over Apple Card will that financial institution agree to all of Apple's demands? One thing for sure Jamie Dimon at JPMorganChase won't.

    If Apple Card gets taken over by another bank, most likely the cardmembers will see fewer benefits and flexibilities that they have enjoyed. One thing that is definitely going away is the absence of fees.
    At this point, we know that Goldman's consumer push hasn't gone well -- and they want out. While they haven't said anything official, JPMorgan is talking with Apple about how they might take over as the issuer.

    Time will tell.
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