The Consumer Financial Protection Bureau (CFPB) has penalized both Apple (NASDAQ:AAPL) and Goldman Sachs (NYSE:GS) for apparent transgressions in regard to the popular Apple Card.
Apple announced its bespoke credit in partnership with Goldman in 2019. The digital/physical offering grew quickly due to its consumer-friendly features, all integrated into the iPhone.
At the same time, there were some hurdles along the way – first emerging via Twitter (now X), raising the interest of the New York Department of Financial Services (DFS). Allegations of gender bias soon emerged – all denied by the issuer.
These hiccups have not deterred Apple Card’s growth; this past January, Apple reported 12 million cardholders.
Today, the CFPB is claiming that Apple “illegally” failed to send tens of thousands of consumer disputes of Apple Card transactions to Goldman Sachs. The CFPB says there were tech issues and some users encountered delays in disputed charges and some had negative information assessed to credit reports.
Many disputes submitted to Apple were said to have never been forwarded to Goldman.
Additionally, the CFPB claims to have uncovered that Apple and Goldman misled consumers about interest-free payment plans for Apple devices.
Many customers thought they would automatically get interest-free monthly payments when buying Apple devices with their Apple Card. Instead, they were apparently charged interest.
In some cases, Apple did not even show the interest-free payment option on its website on certain browsers. Goldman Sachs also misled consumers about the application of some refunds, which led to consumers paying additional interest charges.
Due to these claims, the CFPB has ordered Goldman to pay at least $19.8 million in redress and a $45 million civil penalty. Apple must pay a $25 million civil penalty.
Going forward, the CFPB will ban Goldman from launching a new card unless it can provide a plan that adheres to the law. This requirement is probably moot as Goldman is exiting the card business and working on migrating the Apple Card to another provider. Goldman is also exiting its sojourn into consumer Fintech, having struggled to create a profitable line of business.
Interestingly, the CFPB reports that the arrangement between the two parties incentivized an earlier introduction of Apple Card by giving Apple the right to impose a $25 million penalty for each 90-day delay caused by Goldman. The CFPB claims that four days prior to launch, the Goldman board of directors learned that critical Apple Card dispute systems were not ready due to technological issues.
While the fines assigned to both firms are embarrassing, the amounts are relatively minor compared to the revenue generated by both firms. Similar to Goldman, Apple has shifted its Fintech ambitions toward more partnerships and fewer in-house initiatives.