The Consumer Financial Protection Bureau’s $89 million fine of Goldman Sachs and Apple for mismanagement of the Apple Card was a development many industry insiders could have seen coming. As Goldman continues its retreat from consumer lending, the CFPB now says, in addition to the massive fine, the investment bank is banned from offering new credit cards “unless it can demonstrate that it can actually follow the law.”
The core of the CFPB’s complaint is Goldman’s handling of consumer disputes. “Apple and Goldman launched Apple Card despite third-party warnings to Goldman that the Apple Card disputes system was not ready due to technological issues,” the CFPB said in its announcement of the fine. “These failures meant that consumers faced long waits to get money back for disputed charges, and some had incorrect negative information added to their credit reports.”
The CFPB also said that Apple and Goldman Sachs misled consumers about interest-free payment plans for purchases of Apple devices. Many customers expected their payments to be interest-free if they bought Apple devices with their Apple Card, but that proved not to be the case.
Poisoned Apple
The partnership between Goldman and Apple, first struck in 2018, has been poisoned for some time. In late 2023, Apple sent a term sheet to Goldman indicating a first step toward severing the contract.
The fines being incurred throughout this messy exit highlight the extent to which Goldman appears to have been unprepared to enter this business. Goldman’s loss rate on its credit card loans was the worst among big U.S. card issuers and “well above subprime lenders” at 2.93%, according to a 2022 note issued by JPMorgan.
Goldman apparently overlooked the fact that although many people may want to own an Apple device, not all of them qualify for a credit card. At one point, more than a quarter of Goldman’s card loans went to customers with FICO scores below 660, according to company filings. The profile of Goldman’s card customers resembles that of issuers known for subprime offerings.
Goldman also recently exited its partnership with General Motors, with Barclays taking over that business. The Wall Street Journal has reported that Goldman Sachs could face even bigger losses from the Apple partnership than the losses from the GM sale to Barclays. Apple Card credit balances currently total $17 billion.