Corporate giants Goldman Sachs (NYSE: GS) and Apple (NASDAQ: AAPL) will pay $89 million for violations of consumer protection laws in their joint credit card business that affected hundreds of thousands of people, the U.S. Consumer Financial Protection Bureau announced Wednesday.
In a partnership to finance Apple customers’ purchases through the Apple credit card that Goldman is now seeking to unwind, the two companies allegedly mishandled transaction disputes and misled iPhone purchasers about whether their purchases were in fact interest-free, according to the agency.
In addition to penalties and consumer redress, Goldman will face restrictions on its ability to issue new credit cards, the announcement said.
Rohit Chopra, the agency director, said the alleged misconduct had caused “real harm to real people.”
“This led to wrongful charges, mishandled disputes, and damaged credit reports,” he told reporters, noting that the purchase of an Apple device was often a major expense for families.
In a statement, Goldman Sachs (NYSE: GS) said it was pleased to have resolved the matter.
“We worked diligently to address certain technological and operational challenges that we experienced after launch and have already handled them with impacted customers,” the statement said.
Apple (NASDAQ: AAPL) said it “strongly” disagreed with how the consumer protection agency described its conduct but had nevertheless reached an agreement.
“Upon learning about these inadvertent issues years ago, Apple worked closely with Goldman Sachs to quickly address them and help impacted customers,” a spokesperson said.
Goldman now faces a costly exit from the 2019 Apple partnership that other lenders see as too risky and unprofitable, sources told Reuters in December last year.
Since its foray into consumer banking flopped, Goldman has refocused on its traditional mainstays – investment banking and trading. The consumer business that CEO David Solomon championed has lost billions of dollars.
According to the consumer protection agency, Apple (NASDAQ: AAPL) failed to send Goldman tens of thousands of consumer disputes and in cases when it did, the bank failed to review them in accordance with the law.
Consumers faced long waits for refunds and saw their credit histories unfairly damaged, the agency said. The companies also allegedly misled card users about interest-free payments for Apple devices, with many actually steered toward purchases with interest – in some cases, the interest-free option only appeared when online consumers made purchases using Apple’s web browser, according to the agency.
“We found that if consumers were not using the Safari browser or were using a Safari browser in privacy mode, the option did not come up at checkout,” Eric Halperin, the agency’s enforcement director, told reporters.
Agency officials said Apple will have to produce a plan for complying with consumer protection laws as it continues to offer these services. Should Goldman seek to issue a new credit card, it will be required to submit a compliance plan 90 days in advance, according to the agency.
Goldman will pay $19.8 million in consumer redress and a $45 million fine while Apple is due to pay a $25 million fine, according to the agency.
(Source: ReutersReuters)
