Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
The top US consumer finance watchdog has hit Goldman Sachs and Apple with more than $89mn in fines over how the two companies handled 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 major departure from its traditional business of investment banking and trading.
“Apple and Goldman Sachs illegally sidestepped their legal obligations for Apple Card borrowers,” said Consumer Financial Protection Bureau 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.”
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.
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.
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 over 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, the two companies proceeded with the launch. The CFPB said Apple had the right to enforce a $25mn penalty on Goldman for any 90-day delay.
Credit: Source link
