Co-branded credit card fined! Apple and Goldman Sachs fined $89 million by the U.S. Consumer Financial Protection Bureau

The Consumer Financial Protection Bureau (CFPB), a U.S. government agency, on Wednesday imposed a heavy fine on the Apple and Goldman Sachs partnership that launched the Apple-branded credit card. The two companies were ordered to pay a total of $89 million in fines for mishandling controversial consumer transactions, specifically misleading consumers with the interest-free installment plans on Apple iPhones, leading to financial losses and damage to consumer credit. The CFPB is dedicated to protecting consumers in financial transactions and services, allowing consumers to file complaints regarding credit cards, loans, financial fraud, and other disputes on its official website.

According to a press release on the CFPB website, the CFPB took action against Apple and Goldman Sachs due to inadequate customer service and false statements that impacted hundreds of thousands of Apple Card users. The CFPB found that Apple and Goldman Sachs' interest-free installment plan misled consumers into thinking they would not be charged interest when purchasing Apple devices with the Apple Card, but in reality, interest was still applied. Goldman Sachs also misled consumers in refund claims by providing unclear explanations, resulting in consumers paying additional interest fees.

In addition to the disputes over the interest-free plan, consumer complaints about the lengthy wait for customer service in the complaint process led to a decrease in consumer credit scores, further affecting consumer rights.

CFPB Director Rohit Chopra stated that Apple and Goldman Sachs unlawfully evaded legal responsibilities to Apple Card borrowers, emphasizing that large tech companies and Wall Street financial institutions should not act as if they are not bound by federal regulations. The CFPB is prohibiting Goldman Sachs from issuing Apple Cards to new users unless they are willing to make clear improvements.

Apple Card is a non-financial card, not Apple Pay

Apple entered the financial services market in 2014 and offered various consumer financial products, including Apple Pay, mobile payments, and digital wallets. Apple Pay allows users to link any bank credit card that collaborates with Apple for mobile payments on the iPhone. In contrast to Apple Pay, Apple Card is a credit card that Apple has partnered with Goldman Sachs to offer.

Apple Card is a credit card product prepared by Goldman Sachs to test the waters in the consumer financial market, as Goldman Sachs's main business has historically been in investment and wealth management, not consumer financial products.

Apple and Goldman Sachs Clash over Apple Card

According to a press release from CFPB, Apple's main business model revolves around selling expensive equipment such as iPhones and MacBooks, leading many consumers to rely on payment plans and credit loans to make purchases.

In August 2019, Apple partnered with Goldman Sachs to launch Apple Card, aiming to increase sales through consumer financing. Apple Card seeks to attract more customers to make purchases at Apple retail stores and online using the card.

The collaboration between Goldman Sachs and Apple is part of Goldman Sachs's plan to enter the consumer financial products market. Goldman Sachs issues Apple Card to provide credit to consumers and handle account services. Apple designs the interface and manages the Apple Card account on iPhones, which includes a "report a problem" feature allowing consumers to raise complaints. However, it was revealed that just four days before the launch of Apple Card, the "report a problem" feature was not ready due to technical issues, but the card was still released on schedule. Later in December 2019, Goldman Sachs and Apple introduced the Apple Card installment plan, allowing consumers to pay for Apple products in installments without interest, using a buy now, pay later marketing strategy. However, this new consumer financial service led to both Goldman Sachs and Apple being heavily penalized. Reports indicate that while Goldman Sachs had prepared to enter the credit card market, the issues with Apple Card caused significant setbacks, leading Apple to consider seeking other partners.

Is it all due to inflation? With rising prices, already expensive Apple products become even more unaffordable. Despite this, there are still Apple fans who eagerly purchase, leading to various chaotic situations. Many people buy iPhones just to resell and make money. Introducing a credit card at the wrong time misled consumers into thinking they could pay for their expensive iPhones in installments without interest, only to end up being charged high interest rates, with no room for complaints. The heavy penalties imposed on Goldman Sachs and Apple this time are just the tip of the iceberg. In the past two years, there have been various forms of small loans in the United States, and the rhetoric of enjoying now and paying later has led to more people being unable to repay their debts, resulting in credit bankruptcy. The U.S. CFPB's tough penalties on tech giants and Wall Street serve as a warning to companies that engage in the reckless issuance of small loans, preventing further consumer disputes.