Apple and Goldman Sachs Hit With $89 Million Fine Over Credit Card Failures

Federal regulators have ordered Apple and Goldman Sachs to pay more than $89 million in penalties and customer refunds for mishandling credit card disputes and misleading consumers about interest-free payment options on the Apple Card.

The Consumer Financial Protection Bureau (CFPB) found that the companies’ mismanagement affected hundreds of thousands of Apple Card users, with issues ranging from unresolved transaction disputes to incorrect credit reports. Goldman Sachs will pay $45 million in civil penalties and at least $19.8 million in customer refunds, while Apple has been fined $25 million.

In a significant regulatory action, the CFPB also banned Goldman Sachs from launching any new credit cards unless it can demonstrate its ability to comply with federal law. The restriction excludes the existing Apple Card business.

“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 regulatory investigation revealed that Apple failed to forward tens of thousands of consumer disputes to Goldman Sachs. Even when disputes were transmitted, the bank frequently failed to follow federal requirements for investigating and resolving the cases in a timely manner. These failures left customers facing extended waits for refunds on disputed charges, with some receiving incorrect negative information on their credit reports.

The investigation also uncovered that the companies misled consumers about interest-free payment options for Apple devices. While many customers believed they would automatically receive interest-free monthly payments when purchasing Apple products with their Apple Card, they were instead charged interest. In some cases, Apple’s website didn’t even display the interest-free payment option on certain browsers.

The problems appeared to stem from a rushed launch in 2019. According to the CFPB, Goldman’s board was warned just days before the Apple Card’s debut that certain dispute systems were “not fully ready” due to technological issues. Despite these warnings, the companies proceeded with the launch, with Apple maintaining the right to enforce a $25 million penalty on Goldman for any 90-day delay.

Goldman Sachs defended its record while acknowledging the issues. “Apple Card is one of the most consumer-friendly credit cards that has ever been offered,” said Nick Carcaterra, Goldman’s vice president of corporate communications. “We worked diligently to address certain technological and operational challenges that we experienced after launch and have already handled them with impacted customers.”

Apple took a similar stance, indicating it had worked closely with Goldman Sachs to address the “inadvertent issues” when they arose. “While we strongly disagree with the CFPB’s characterization of Apple’s conduct, we have aligned with them on an agreement,” an Apple spokesperson said.

The regulatory action comes at a pivotal moment for the partnership. Goldman Sachs is actively seeking to exit its consumer banking business, and is offloading its General Motors credit card portfolio to Barclays. The bank has struggled with its consumer banking ambitions, setting aside $397 million for credit losses in its latest quarter, a marked increase from previous periods.

The situation also highlights the challenges facing tech companies as they expand into financial services. Apple’s move into banking services, which began with Apple Pay and expanded with the Apple Card in 2019, has drawn attention from traditional banking leaders. JPMorgan CEO Jamie Dimon has repeatedly identified Apple as an emerging competitor in financial services, noting that “Apple moves money, holds money, lends money. They’re becoming a bank.”

For Goldman Sachs, the $45 million fine represents a relatively small hit compared to its recent quarterly profits of $3 billion. However, the reputational damage and regulatory restrictions could have longer-lasting implications for both companies’ financial services ambitions.

The CFPB’s action serves as a reminder that despite the innovation and convenience promised by partnerships between technology and banking giants, traditional consumer protection rules still apply. As more tech companies venture into financial services, regulators are signaling their intent to maintain strict oversight of these hybrid offerings.

JPMorgan has reportedly held preliminary discussions about taking over Apple’s credit card programs, though no final decisions have been made. Whatever the outcome, the regulatory action ensures that future tech-banking partnerships will likely face increased scrutiny from both regulators and consumers.