CFPB Orders Apple & Goldman Sachs to Pay Over $89 Million for Apple Card Failures

The Consumer Financial Protection Bureau (CFPB) has mandated that Apple Inc. and Goldman Sachs Group, Inc. pay more than $89 million due to substantial customer service failures and misleading practices affecting hundreds of thousands of Apple Card users. The CFPB's investigation revealed that the two companies mishandled transaction disputes and provided inaccurate information about interest-free payment options for consumers.

The CFPB found that Apple failed to transmit tens of thousands of consumer disputes related to Apple Card transactions to Goldman Sachs. When disputes were forwarded, the bank did not adhere to federal standards for investigating these claims. Despite receiving alerts about technological shortcomings in their dispute resolution system, Apple and Goldman proceeded with the launch of the Apple Card, resulting in significant delays for consumers seeking refunds for disputed charges. Additionally, some users faced unjust negative entries on their credit reports.

In response to these findings, Goldman Sachs has been ordered to pay at least $19.8 million in consumer redress, alongside a civil penalty of $45 million. Apple, on the other hand, has been levied a civil penalty of $25 million. Moreover, the CFPB has placed a ban on Goldman Sachs launching any new credit card products unless it can demonstrate compliance with federal regulations.

The CFPB’s investigation also uncovered misleading marketing practices related to interest-free payment plans for Apple products. Many customers believed they would automatically qualify for interest-free monthly payments when purchasing devices with their Apple Card. Contrary to these expectations, several were charged interest instead, as the interest-free option was not always visible on Apple's website across all browsers. Goldman Sachs further complicated matters by misleading customers regarding the application of refunds, resulting in additional, unexpected interest charges.

CFPB Director Rohit Chopra emphasized the severity of the companies' misconduct, stating, “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.” He added that the CFPB would closely monitor Goldman Sachs' future endeavors in the credit card space to prevent similar violations.

The CFPB identified several violations of the Consumer Financial Protection Act and the Truth in Lending Act, resulting in significant consumer harm, including:

• Failure to Process or Share Consumer Disputes: Many disputes submitted through the Apple Wallet app were either mishandled or not forwarded to Goldman Sachs, preventing resolution and unfairly holding consumers accountable for disputed charges.
• Inadequate Investigation of Cardholder Disputes: For the disputes that reached Goldman Sachs, the bank failed to conduct timely investigations or provide necessary notifications, which led to damaging credit report entries for consumers.
• Misleading Marketing of Interest-Free Payment Plans: Many consumers were under the impression that they would receive interest-free financing for their purchases, yet many ended up with interest-bearing balances due to inadequate enrollment processes.
• Inaccurate Application of Refunds: Goldman Sachs misrepresented how refunds would be allocated, causing over 10,000 cardholders to incur additional interest expenses due to misapplied refunds.

Under the authority of the Consumer Financial Protection Act, the CFPB can take enforcement actions against companies that engage in unfair, deceptive, or abusive practices. The bureau has mandated that Apple pay a civil penalty of $25 million to the CFPB’s victims relief fund. Goldman Sachs, besides its redress payment of at least $19.8 million and civil penalty of $45 million, must present a credible compliance plan before launching any new credit card product.

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