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The top US consumer finance watchdog has fined Goldman Sachs and Apple more than $89mn, saying the two companies “illegally sidestepped” their obligations to customers of their shared credit card business.
The fines announced on Wednesday point to the struggles Goldman and Apple have had in expanding into financial products for everyday consumers. For Goldman, the business represented a significant departure from its traditional business of investment banking and trading.
“The CFPB is banning Goldman Sachs from offering a new consumer credit card unless it can demonstrate that it can actually follow the law,” said Consumer Financial Protection Bureau director Rohit Chopra. “Apple and Goldman Sachs illegally sidestepped their legal obligations for Apple Card borrowers.”
It also represents a rebuke for Apple five years after it made a big push into financial services with its own credit card, building on the success of its digital wallet and payments offering. However, it is unlikely to deter the company’s ambitions in banking and payments.
The CFPB alleged that Apple failed to send thousands of transactions that were disputed by card customers to Goldman and that Goldman had not followed federal requirements for investigating disputes that were forwarded. The agency also said that the two companies misled customers about interest-free payment plans for Apple products.
Goldman has been ordered to pay at least $19.8mn in redress as well as a $45mn civil money penalty. Apple will pay $25mn in civil penalties.
In a statement, Goldman said it had “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 said.
Apple said in a statement: “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 characterisation 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 companies did not admit or deny the regulator’s findings in court filings.
Goldman is in the process of seeking an exit from its credit card partnership with Apple as the bank scales back its push into retail banking following years of heavy losses. Goldman’s credit card business also included a partnership with General Motors, which Barclays is now taking on. JPMorgan has held initial talks on taking over the iPhone maker’s credit card programmes.
Goldman has about $20bn in credit card loans, a little more than 10 per cent of its overall loan portfolio but a tiny fraction of its $1.5tn in total assets.
The CFPB alleged there were issues early on in the partnership between two of the country’s most iconic companies. Just days before the launch of the Apple Card in 2019, Goldman’s board of directors was told that certain Apple Card dispute systems were “not fully ready” due to technological issues.
However, they proceeded with the launch. The CFPB said Apple had the right to enforce a $25mn penalty on Goldman for any 90-day delay.
The CFPB has been pushing to extend its oversight of big tech’s expansion into financial services, as more and more consumers link their bank accounts to digital wallet services.
Apple has made other changes to its financial services business in recent months. In June it scrapped its “buy now, pay later” service that it had rolled out in the US in 2023. In August, Apple announced it was opening up its tap-to-pay technology to rivals, after facing regulatory pressure in the EU.
Apple’s expansion into financial services caused a stir among more traditional banks. It does not break out its revenue for financial services, but its overall services revenue — which includes the App Store, Apple Music and iCloud — has been important, showing persistent double-digit growth and offsetting a decline in iPhone sales earlier this year.
JPMorgan chief executive Jamie Dimon has repeatedly called out Apple, as well as other tech companies, as emerging competitors to traditional banks in offering financial services to customers. “Apple moves money, holds money, lends money,” he said at an investor event earlier this year. “They’re becoming a bank.”