How Did Apple Card Failures Cost Apple and Goldman over $89M?

Think your Apple Card is hassle-free? Think again. Goldman Sachs and Apple just got slapped with a $89 million fine and Goldman was temporarily banned from issuing new cards due to their mishandling of the Apple Card partnership. This means many customers have faced unresolved charge disputes and incorrect credit reports. Let's get into the details and see how this situation could shake things up for everyone.   

Apple Card Slip-Up

Apple partnered with Goldman Sachs in 2019 to enter the credit card market with Apple Card, using its reputation for consumer-friendly features. By the end of September of that same year, Goldman had already lent out around $10 billion, with customers holding $736 million in loan balances. In April 2023, Apple added a new perk for Apple Card users: a 4.15% high-yield savings account with Goldman Sachs. Cardholders can stash their 3% cashback from select purchases or any additional savings they want in the account. Despite early success, lending $10 billion within two months, tech issues around dispute resolution and miscommunication over interest-free payment plans surfaced.  

According to the CFPB, Apple failed to send tens of thousands of Apple Card disputes to Goldman Sachs. When Apple finally notified Goldman about the disputes, the bank didn’t adhere to several key federal investigative guidelines. The watchdog also pointed out that the companies rolled out their credit card program too soon despite warnings from third parties about unresolved tech issues with the dispute system, Apple and Goldman Sachs moved ahead with the launch anyway. 

Missteps and Missed Deadlines

The CFPB pointed out that these unresolved tech issues left customers waiting far too long for refunds on disputed charges, and in some cases, even resulted in incorrect negative marks on their credit reports. The agency also discovered that Apple and Goldman Sachs misled customers about the Apple Card’s interest-free payment plans for Apple products, like the iPhone. While Apple advertised the card’s lack of fees, such as annual fees, late fees, or foreign transaction fees, purchases still came with interest charges. An Apple spokesperson responded by stating that the company strongly disagrees with the CFPB’s interpretation of its actions but agreed to comply with the agency’s order.

Official Responses to the Card Debacle

A company official described the Apple Card as "one of the most consumer-friendly credit cards," designed to promote users' financial well-being. They explained that after discovering these issues a few years ago, Apple worked closely with Goldman Sachs to quickly resolve the problems and assist affected customers. 

Goldman Sachs also expressed satisfaction with the resolution reached with the CFPB. A spokesperson mentioned that the company worked hard to tackle the tech and operational issues that surfaced post-launch and has already taken steps to support impacted customers. 

As part of the settlement, Goldman Sachs was fined $45 million and ordered to pay $20 million in restitution to customers, while Apple was fined $25 million. The CFPB also barred Goldman Sachs from launching any new credit cards unless it can guarantee the product will comply with the law. 

What’s in Store for Apple and Goldman?

Apple and Goldman Sachs must now address compliance concerns and repair trust with consumers. Goldman, fined $45 million and ordered to pay $20 million in restitution, cannot launch new credit cards unless it ensures compliance with the law.  

Apple, fined $25 million, will likely need to refine its partnership with Goldman or adjust its approach to credit products. Both companies have agreed to comply with the CFPB's order, but their path forward will focus on improving their processes, ensuring transparency, and perhaps reevaluating future consumer lending ventures.

Compliance Cues from the Apple Card Fiasco

• Compliance is Non-Negotiable: Even top industry players must strictly adhere to federal guidelines to avoid costly penalties.
• Transparency is Key: Clear and accurate communication about product features, fees, and terms is essential to maintain customer trust.
• Thorough Testing Matters: Launching products without fully resolving technical issues can lead to operational failures and reputational damage.
• Handle Customer Disputes Promptly: Timely and accurate dispute resolution is crucial to avoid regulatory scrutiny and consumer dissatisfaction.
• Learn from Mistakes: Use compliance challenges as an opportunity to refine internal processes and strengthen future product offerings.

These lessons are a reminder to finance, accounting, and tax professionals that integrity and adherence to standards are essential, no matter the size of the company. Hope you enjoyed the read! Don’t forget to subscribe to our newsletter and join our community of professionals for more news and updates!