Goldman Sachs (GS) and Apple (AAPL) must pay $89.8 million for circumventing legal obligations to their joint credit card customers, the Consumer Financial Protection Bureau (CFPB) announced Wednesday.
The regulator said Apple has failed to send tens of thousands of consumer disputes over Apple Card transactions to Goldman Sachs. When Apple filed the disputes, the bank failed to comply with numerous federal requirements for investigating the disputes, according to a press release from the regulator.
Goldman will pay $64.8 million. Of that total, $19.8 million will go back to consumers, while the bank will pay the remaining $45 million in fines to the regulator. In addition, Apple will pay the CFPB $25 million for its role in marketing and maintaining the Apple Card.
“Apple and Goldman Sachs illegally circumvented their legal obligations to Apple Card borrowers,” CFPB Director Rohit Chopra said in a statement, noting that the alleged misconduct affected hundreds of thousands of Apple Card customers.
The CFPB bans Goldman from launching a new credit card unless it “can demonstrate that it can actually comply with the law,” Chopra added.
The regulator also said Apple and Goldman misled many consumers into believing they would automatically receive interest-free monthly payments if they bought Apple devices. Instead, those same customers were charged interest.
In addition, the CFPB said Goldman misled consumers about the application of some refunds, resulting in consumers paying additional interest charges.
“Big Tech companies and big Wall Street firms should not behave as if they are exempt from federal law,” Chopra added.
“We have been working hard to address certain technology and operational challenges we encountered post-launch and have already addressed them with affected customers,” Goldman Sachs spokesperson Nick Carcaterra said in a statement. “We are pleased to have reached a resolution with the CFPB,” Carcaterra added.
Both stocks fell Wednesday morning. Apple is down 2% as of noon, while Goldman is roughly flat.
By entering into a card partnership with Apple in 2019, Goldman Sachs provided credit to consumers and serviced their accounts, while Apple was responsible for the design, marketing and advertising of the consumer interface.
As part of the agreement, Apple had the right to impose a $25 million fine for every 90 days of delay caused by Goldman.
The CFPB said its investigation found that Goldman’s board of directors learned four days before the launch that crucial Apple Card dispute systems were “not fully ready” due to technology issues. The companies continued anyway.
That led to millions of dollars in spending for consumers due to errors within the card program’s ability to share and investigate customer disputes, properly convey payment plan details through marketing, and issue refunds through account management.
The CFPB’s fine comes as Goldman tries to make a difficult retreat from its forays into consumer lending.
Last week, Goldman reported a pretax profit of $415 million in the third quarter, tied in part to the sale of its General Motors credit card program to Barclays. That loss also included how much Barclays was willing to pay for the existing program, given the high depreciation that came with it.
Since 2020, total pre-tax losses associated with the consumer sector have cost Goldman more than $6 billion.
While the bank has scaled back much of this activity and benefited from a return to investment banking after a two-year drought, Goldman is still waiting to pass on its role in Apple Card to another lender.
David Hollerith is a senior reporter for Yahoo Finance, covering banking, cryptocurrency and other areas of finance.
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