If there’s a regulatory agency busier this week than the Consumer Financial Protection Bureau (CFPB), you’d be hard-pressed to name one.
The CFPB, which just released final rules on open banking and data sharing on Tuesday, will fine Apple and Goldman Sachs more than $89 million on Wednesday (October 23) for alleged customer service violations related to Apple Card. announced.
Goldman will pay $19.8 million and a $45 million fine in what the CFPB called “relief” in announcing the enforcement action. Apple will pay a $25 million fine, the announcement detailed.
Beyond the financial implications: Goldman Sachs cannot issue new cards unless it can prove to regulators that the cards comply with federal law.
In a statement provided to PYMNTS, Goldman Sachs spokesperson Nick Calcaterra said: “Apple Card is one of the most consumer-friendly credit cards ever offered. We have worked diligently to address the specific technical and operational challenges we have experienced since its launch. We have already addressed this with the affected customers. We are pleased to have reached a settlement with the CFPB and are proud to have worked with Apple to develop such an innovative and award-winning product. Masu.”
PYMNTS also reached out to Apple for comment, but has not yet received a response.
The CFPB’s Apple Card investigation has been ongoing for more than two years. Of course, Goldman will withdraw from its partnership with Apple Card. And as reported just last week, the Wall Street powerhouse will no longer be the issuer of the General Motors GM Rewards Mastercard.
Customer service breakdown
In Wednesday’s Apple consent order filing, the CFPB alleged that the two companies were involved in “defects in customer service and misrepresentations that affected hundreds of thousands of Apple Card users.” The CFPB said in its lawsuit that Apple did not send details about thousands of customer disputes to Goldman. Even if Goldman provided information about the disputes, it did not vet them under applicable law.
“When a consumer disputes an Apple Card transaction through Apple’s Problem Reporting feature by filling out the initial form, the dispute is initially sent to Apple, which then sends it to Goldman for investigation. “Apple has failed to do so in tens of thousands of cases since June 2020,” the CFPB wrote.
As a result, consumers did not receive timely refunds, the bureau said. Other cardholders also suffered damage to their credit reports because Goldman reported these consumers to credit agencies.
For the disputes that reached Goldman Sachs, the bank did not meet federal requirements, including sending timely notices of approval, conducting reasonable investigations, or providing resolution documentation within 90 days. These failures resulted in consumers facing false negative credit reports and potentially being held liable for fraudulent charges.
The CFPB also accused the companies of “misleading” consumers about payments for Apple products, claiming that the payments were interest-free when in fact they were. The interest-free payment option was only offered to users when they chose to purchase an Apple product while using Apple’s Safari browser.
“Until at least July 2020, the checkout process…consumers purchasing an iPhone were offered the option of ‘paying in full’ or ‘paying monthly.’ It was not explained what was going on. [Apple Card Monthly Installments]Until a consumer selects this option, the CFPB added, they must provide details about the ACMI.
The CFPB said the companies went ahead with the launch of Apple Card in August 2019 despite warning Goldman’s board that the key dispute system was “completely unready” due to technical issues. It is being said. The partnership agreement encourages early adoption by giving Apple the right to impose a $25 million penalty for each 90-day delay by Goldman, as detailed in the consent order against Goldman Sachs. I was doing it.
The enforcement action cites violations of both the Consumer Financial Protection Act and the Truth in Lending Act. The fine will be paid to the CFPB’s Victim Relief Fund.
