Banking and Finance Law Daily Wrap Up, CREDIT, DEBIT AND GIFT CARDS—Apple, Goldman Sachs fined more than $89M for mishandling disputes, misleading consumers, (Oct 23, 2024)

By Patricia K. Ruiz, J.D.

Under consent orders entered into with the CFPB, Goldman Sachs will pay $45 million and Apple will pay $25 million in restitution and civil money penalties.

The Consumer Financial Protection Bureau announced that Apple Inc. and Goldman Sachs Bank USA have agreed to pay more than $89 million in restitution and civil money penalties, after the Bureau determined the companies illegally mishandled transaction disputes and misled buyers of Apple devices about interest-free payment options. The CFPB’s investigation found violations of the Consumer Financial Protection Act and the Truth in Lending Act. Both companies entered into consent orders with the Bureau pursuant to stipulations without admitting or denying any of findings of fact or conclusions of law (In the Matter of Goldman Sachs Bank USA, File No. 2024-CFPB-0011 (CFPB Admin. Proc. Oct. 23, 2024); In the Matter of Apple Inc., File No. 2024-CFPB-0012 (CFPB Admin. Proc. Oct. 23, 2024)).

Apple Card. Apple introduced Apple Card in August 2019 in partnership with Goldman Sachs Bank, allowing Apple to provide a financing mechanism to increase sales of its devices and spending at its retail stores and its App Store. The Apple Card was one of Goldman Sachs’ early forays into consumer finance, offering Goldman Sachs a prime opportunity to establish itself in the market, according to the CFPB. With the Apple Card, Goldman Sachs extends credit to consumers and handles account servicing, while Apple designed the customer-facing interfaces, including the “Report an Issue” feature, which allows consumers to dispute Apple Card transactions. In December 2019, Goldman Sachs and Apple introduced the Apple Card Monthly Installments feature, which allowed consumers to finance the purchase of certain Apple devices with Apple Card directly from Apple, touting interest-free monthly installments.

CFPB findings. The CFPB determined that Apple failed to send tens of thousands of consumer disputes of Apple Card transactions to Goldman Sachs. When it did send disputes, the bank failed to follow numerous federal requirements for investigating the disputes. The CFPB further found that Apple and Goldman Sachs launched the Apple Card despite receiving warnings from third parties that the Apple Card disputes system was not ready because of technological issues. As a result, consumers faced long waits to receive money back after disputing charges, and some consumers had incorrect negative information added to their credit reports.

Additionally, Apple and Goldman Sachs allegedly misled consumers about interest-free payment plans for Apple devices, causing thousands of cardholders to incur interest charges. The marketing of the Apple Card Monthly Installments plan led consumers to believe they would automatically receive interest-free financing when purchasing Apple devices; however, many cardholders were unknowingly charged interest because they were not automatically enrolled as expected. Consumers also faced confusing checkout options about enrolling in an interest free plan, as Apple only presented the payment plan as an option to consumers using Apple’s Safari browser. Goldman Sachs also misled consumers about the application of refunds between their cards’ two balances—the plan balance and their interest-bearing revolving balance—leading consumers to pay additional interest charge, the CFPB determined.

Consent orders. The Goldman Sachs stipulation and consent order requires the company to pay at least $19.8 million in redress to victims for its role in marketing, offering, and servicing the Apple Card, as well as a $45 million civil money penalty. The Apple stipulation and consent order requires Apple to pay a $25 million civil money penalty, which will be paid into the CFPB’s victims relief fund. Further, the CFPB will require Goldman Sachs to give the CFPB a credible plan for how the product will comply with the law before introducing any new credit card product. If Goldman Sachs makes another attempt to enter the credit card market, the CFPB will closely police the company to avoid repeat offenses.

Companies: Apple, Inc.; Goldman Sachs Bank USA

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