$89 million “bell” for Apple and Goldman Sachs –

The US consumer finance watchdog CFPB has fined Goldman Sachs and Apple more than $89 million, saying the two companies “unlawfully shirked” their obligations to its customers of their joint credit card business.

The fines announced Wednesday indicate the difficult road Goldman and Apple have had in expanding into consumer financial products. For Goldman, the venture represented a significant departure from its traditional investment banking and trading business.

“CFPB bars Goldman Sachs from offering new credit card for consumers unless he can prove he can actually follow the law,” said the director of the Consumer Financial Services Protection Bureau, Rohit Chopra. “Apple and Goldman Sachs illegally shirked their legal obligations to Apple Card borrowers.”

The “bell” for Apple and Goldman Sachs

The decision is also a rebuke for Apple five years after it made a big shift into financial services with its own credit card, building on the success of the digital wallet. However, according to the Financial Times, the decision is unlikely to prevent the company’s ambitions in banking and payments.

The CFPB alleged that Apple failed to send thousands of transactions disputed by card customers to Goldman and that Goldman failed to follow federal requirements to investigate the disputes that were forwarded. The agency also said the two companies misled customers about interest-free payment plans for Apple products.

Goldman was ordered to pay at least $19.8 million in restitution and a $45 million fine. Apple will pay $25 million in civil penalties.

In a statement, Goldman said it has “worked diligently to address some of the technological and operational challenges we have faced since launch and has already addressed them with affected clients.”

“We are pleased to have reached a settlement with the CFPB and are proud to have developed such an innovative and award-winning product together with Apple,” Goldman said in a statement.

Apple said in a statement: “Once these unintended issues became known years ago, Apple worked closely with Goldman Sachs to quickly address them and help affected customers. While we strongly disagree with the CFPB’s characterization of Apple’s conduct, we have aligned with them on a settlement. We look forward to continuing to deliver a great experience for our customers with Apple Card.”

It is noted that the companies neither admitted nor denied the regulator’s findings in court filings.

And in the background… divorce

Goldman is in the process of seeking an exit from its credit card partnership with Apple as the bank scales back its push into retail banking after years of heavy losses. Goldman’s credit card business also included a partnership with General Motors, which Barclays is now taking over. JPMorgan has held initial talks to take over the iPhone maker’s credit card programs.

Goldman has about $20 billion in credit card loans, just over 10 percent of its total loan portfolio, but a small fraction of its $1.5 billion in total assets.

The CFPB claimed there were issues early on in the partnership between two of the most iconic companies in the US economy. Just days before the Apple Card was launched in 2019, Goldman’s board was told that some Apple Card challenge systems were not “fully ready” due to technology issues.

However, they went ahead with the launch. The CFPB said Apple had the right to fine Goldman $25 million for any 90-day delay.

Increased supervision

The CFPB is pushing to expand oversight of Big Tech’s expansion into financial services as more consumers link their bank accounts to digital wallet services.

The US tech company has made other changes to its financial services business in recent months. In June abolished the “buy now, pay later” service which he had developed in the US in 2023. In August, Apple announced it was opening up its tap-to-pay technology to rivals after facing regulatory pressure in the EU.

Apple’s expansion into financial services has upset more traditional banks. It doesn’t break out its financial services revenue, but its overall services revenue — which includes the App Store, Apple Music and iCloud — was significant, showing persistent double-digit growth and offsetting a decline in iPhone sales earlier this year.

JPMorgan CEO Jamie Dimon has repeatedly characterized Apple, as well as other technology companies, as emerging competitors to traditional banks in offering financial services to customers. “Apple trades money, owns money, lends money,” he said at an investor event earlier this year. “They are becoming a bank,” he concluded.

SOURCE: ot.gr