Category Archives: CFPB

CFPB Orders Apple and Goldman Sachs to Pay Over $89 Million for Apple Card Failures

Posted on by

FOR IMMEDIATE RELEASE:
October 23, 2024

CONTACT:
Office of Communications
press@cfpb.gov

CFPB Orders Apple and Goldman Sachs to Pay Over $89 Million for Apple Card Failures

Companies illegally mishandled transaction disputes and misled iPhone purchasers about interest-free payment options

WASHINGTON, D.C. — Today, the Consumer Financial Protection Bureau (CFPB) took action against Apple and Goldman Sachs for customer service breakdowns and misrepresentations that impacted hundreds of thousands of Apple Card users. The CFPB found that Apple failed to send tens of thousands of consumer disputes of Apple Card transactions to Goldman Sachs, and when Apple did send disputes to Goldman Sachs, the bank did not follow numerous federal requirements for investigating the disputes. Apple and Goldman launched Apple Card despite third-party warnings to Goldman that the Apple Card disputes system was not ready due to technological issues. These failures meant that consumers faced long waits to get money back for disputed charges, and some had incorrect negative information added to their credit reports. The CFPB is ordering Goldman Sachs to pay at least $19.8 million in redress and a $45 million civil money penalty, and Apple to pay a $25 million civil money penalty. The CFPB is also banning Goldman Sachs from launching a new credit card unless it can provide a credible plan that the product will actually comply with the law.

The CFPB also found that Apple and Goldman Sachs misled consumers about interest-free payment plans for Apple devices. Many customers thought they would automatically get interest-free monthly payments when buying Apple devices with their Apple Card. Instead, they were charged interest. In some cases, Apple did not even show the interest-free payment option on its website on certain browsers. Goldman Sachs also misled consumers about the application of some refunds, which led to consumers paying additional interest charges.

“Apple and Goldman Sachs illegally sidestepped their legal obligations for Apple Card borrowers. Big Tech companies and big Wall Street firms should not behave as if they are exempt from federal law,” said CFPB Director Rohit Chopra. “The CFPB is banning Goldman Sachs from offering a new consumer credit card unless it can demonstrate that it can actually follow the law.”

Goldman Sachs Group, Inc. (NYSE: GS), is one of the largest financial institutions in the world. It operates Goldman Sachs Bank USA, headquartered in New York City. Goldman Sachs primarily focuses on investment banking and investment management, not consumer finance. Apple Card was Goldman Sachs’s first significant experiment in credit card lending.

Apple Inc. (NASDAQ: AAPL) is a multinational technology company headquartered in Cupertino, California. Apple entered the financial services market in 2014 and has offered several consumer financial products, including Apple Pay, a mobile payment system and digital wallet service; Apple Cash, a digital debit card allowing for peer-to-peer payments; Apple Pay Later, a Buy Now, Pay Later product; and Apple Card, the company’s first credit card.

Apple Card Partnership

Apple’s business model relies on substantial revenue and profits from sales of its devices, such as iPhones, iPads, and MacBooks. Many of Apple’s products are more expensive than other brands, leading many consumers to finance purchases with payment plans and credit products.

In August 2019, Apple introduced Apple Card in partnership with Goldman Sachs Bank, marking a significant expansion into consumer lending for both companies. The partnership allowed Apple to provide a financing mechanism to ratchet up sales of its devices, including iPhones and iPads. The Apple Card also sought to induce more spending at Apple’s retail stores and Apple’s App Store.

Goldman Sachs’ involvement in Apple Card was part of the bank’s foray into consumer finance, which began in 2016 with the launch of its Marcus brand. Despite limited experience in the consumer credit card market, the Apple Card partnership offered Goldman Sachs a prime opportunity to establish itself in the market.

With the Apple Card, Goldman Sachs extends credit to consumers and handles account servicing. Apple designed the customer-facing interfaces used to manage Apple Card accounts on Apple devices. That includes a “Report an Issue” feature which allows consumers to dispute Apple Card transactions. Apple was also deeply involved in marketing and advertising.

Apple and Goldman’s agreement incentivized an earlier introduction of Apple Card by giving Apple the right to impose a $25 million penalty for each 90-day delay caused by Goldman. Four days before launch, the Goldman Sachs board of directors learned that critical Apple Card disputes systems were “not fully ready” due to technological issues, but the companies proceeded anyway.

Later, in December 2019, Goldman Sachs and Apple introduced a new feature called Apple Card Monthly Installments, which allows users to finance the purchase of certain Apple devices with Apple Card directly from Apple through interest-free monthly installments, similar to a Buy Now, Pay Later product.

Servicing and Communications Meltdowns

When Apple’s customers experienced improper charges or filed disputes, the systems developed by the companies failed to address them. Under federal law, when consumers dispute transactions as fraudulent or unauthorized financial institutions must conduct a timely inquiry on what went wrong. Goldman Sachs failed to adhere to this requirement. Separately, many disputes submitted to Apple were not even sent to Goldman Sachs at all. Additionally, Apple’s deceptive marketing materials and illegal conduct caused consumers to pay interest on purchases of iPhones and other Apple devices with Apple Card that they believed would be covered by an interest-free payment plan. The CFPB’s investigation found violations of the Consumer Financial Protection Act and the Truth in Lending Act.  The CFPB also found that the companies harmed consumers by:

  • Failing to process or share consumer disputes: Apple Card users were directed to dispute transactions through a “Report an Issue” feature in the Wallet app. For some disputes, Apple sent consumers a separate link in the Messages app asking for more information. Apple failed to send these disputes to Goldman Sachs if the second form was incomplete. Even after Goldman Sachs alerted Apple to this issue, the problem persisted. As a result, neither Apple nor Goldman Sachs investigated tens of thousands of such disputes and cardholders were unfairly held responsible for disputed transactions.
  • Failing to investigate cardholder disputes: For the disputes that Apple did send to Goldman Sachs, the bank failed to consistently send acknowledgment notices within 30 days, conduct reasonable investigations, or send resolution letters explaining the determinations of its investigations within 90 days. These failures led to Goldman Sachs illegally placing damaging information on consumers’ credit reports and holding cardholders responsible for potentially fraudulent or unauthorized purchases.
  • Misleading cardholders about a payment plan for iPhones and other Apple products: The marketing of the Apple Card Monthly Installments plan led consumers to believe they would automatically receive interest-free financing when purchasing iPhones and other Apple devices with their Apple Card. The plan allowed cardholders to purchase Apple devices through a series of interest-free payments over a period of six months to two years. However, many cardholders were unknowingly charged interest because they were not automatically enrolled as expected. They also faced confusing checkout options about enrolling in the plan. For online purchases, Apple only presented the payment plan as an option to consumers using Apple’s own Safari browser. Due to Apple and Goldman’s actions, instead of making interest-free payments, thousands of cardholders purchased Apple devices on interest-bearing revolving balances and incurred interest charges.
  • Misleading cardholders about refunds: Cardholders with an Apple Card Monthly Installments plan essentially had two card balances – the plan balance and their interest-bearing revolving balance. For more than 10,000 cardholders, Goldman Sachs misled consumers about how it would apply certain refunds between the two balances. Contrary to Goldman’s representations, portions of refunds for unrelated purchases were applied to the interest-free plan balance instead of the interest-bearing revolving balance. As a result, consumers incurred additional and unexpected interest expenses.

Enforcement Action

Under the Consumer Financial Protection Act, the CFPB has the authority to take action against institutions that violate federal consumer financial laws, including by engaging in unfair, deceptive, or abusive acts and practices. The CFPB also has the authority to enforce the Truth in Lending Act and Regulation Z.

Today’s order against Apple requires the company to pay a civil money penalty of $25 million, which will be paid into the CFPB’s victims relief fund.

The CFPB is also ordering Goldman Sachs to pay at least $19.8 million in redress to victims for its role in marketing, offering, and servicing the Apple Card. Goldman Sachs must also pay a $45 million civil money penalty. Before introducing any new credit card product, Goldman Sachs must give the CFPB a credible plan for how the product will comply with the law. If Goldman Sachs makes another attempt to enter the credit card market, the CFPB plans to closely police the company to avoid repeat offenses.

Read today’s order against Apple.

Read today’s order against Goldman Sachs.

Consumers can submit complaints about financial products and services by visiting the CFPB’s website or by calling (855) 411-CFPB (2372).

Employees who believe their company has violated federal consumer financial protection laws are encouraged to send information about what they know to whistleblower@cfpb.gov. To learn more about reporting potential industry misconduct, visit the CFPB’s website.

CFPB Launches Effort to Spur New Opportunities for Homeowners in the Mortgage Market

Posted on by

FOR IMMEDIATE RELEASE:
September 22, 2022

CONTACT:
Office of Public Affairs
press@cfpb.gov

CFPB Launches Effort to Spur New Opportunities for Homeowners in the Mortgage Market

Agency seeks information on refinances, mortgage products to promote competition and support household financial stability

Washington, D.C. —The Consumer Financial Protection Bureau (CFPB) is asking for public input on ways to spur new mortgage products that help households. The CFPB seeks insights on ways to improve mortgage refinances for homeowners who would benefit from refinancing, especially for borrowers with smaller loan balances. The agency also seeks public input on ways to support automatic short-term and long-term loss mitigation assistance for homeowners who experience financial disruptions. The CFPB will use this information as it considers steps to support household financial stability and address refinance market gaps. Today’s initiative is part of a broader CFPB effort to promote competition and innovation in consumer finance markets.

“The mortgage market has not provided products that allow all households to save money by refinancing at a lower interest rate,” said CFPB Director Rohit Chopra. “We are eager for input on ways that borrowers taking out loans today can refinance to lower rates in the future.”

Mortgage payments are often a household’s single largest expenditure, so the terms of a mortgage greatly impact a household’s financial stability. When interest rates decline, many borrowers benefit from the lower rates by refinancing their loans. For example, researchers at the Federal Reserve Bank of Boston found that total consumer savings from mortgage refinancing from January 2020 to October 2020, during the refinancing boom, was $5.3 billion annually. The typical consumer saved nearly $300 a month ($279) from refinancing during that period. The savings from refinancing a mortgage at a lower rate can translate into increased wealth and equity for borrowers. However, mortgage refinancing can be harder to access for borrowers with smaller loan balances. Black and Hispanic borrowers, who on average have smaller loans, have not participated in recent refinance booms at the same rate as white borrowers.

Refinancing volume has dropped dramatically, down almost 70% from last year, as interest rates have risen. New streamlined and automatic refinancing mortgage products could make sure that those buying a home now, or refinancing to cover other needs, are able to benefit from the next interest rate drop.

Periods of economic turmoil can pose significant challenges for mortgage borrowers. At the height of the COVID-19 pandemic, for example, millions of borrowers lost jobs and income and were at risk of losing their homes. Forbearance protections, passed by Congress via the CARES Act, allowed millions of homeowners with federally-backed mortgages to temporarily stop their monthly mortgage payments. Many servicers of mortgages that did not qualify for CARES Act protections followed the government’s lead and offered similar protections. Over the course of the pandemic, 8.2 million borrowers entered a forbearance program, and as of July 2022, 93% have exited. Of those who have exited forbearance, only 5% are delinquent or in active foreclosure. The CFPB is interested in the features of these pandemic-related forbearance programs that should be made more generally available to borrowers, and in particular, if there are ways to automate and streamline the offering of long-term loss mitigation assistance.

Specifically, the CFPB is requesting information about:

  • Targeted and streamlined refinance programs: Targeted and streamlined refinance programs have been used to improve refinancing, typically with lower transaction costs than traditional refinances. Refinance programs can lead to lower monthly payments and interest rates for homeowners who previously would have been unlikely or unable to refinance.
  • Innovative refinancing products, such as automatic refinancing: Such products might automatically trigger an offer to refinance or automatically reduce a loan’s interest rate in certain circumstances. This could help homeowners who currently face barriers to refinancing, including those with lower-balance mortgages, access beneficial refinancing.
  • Automatic forbearance and long-term loss mitigation assistance: Mortgage products with automatic forbearance features may help ensure that homeowners whose incomes or financial situations are affected by events, such as natural disasters, are able to receive timely payment relief that could help them avoid foreclosure and provide increased household financial stability.  Additionally, such automatic forbearance features could provide benefits for mortgage servicers and holders as well.

Competitive mortgage markets promote opportunities for wealth creation and promote broader household financial stability. Today’s request for information seeks innovative and timely ideas to address persistent market failures and to help borrowers access beneficial refinancing along with short- and long-term loss mitigation assistance. Public input will help inform future policy initiatives, rulemaking, and other mortgage competition and innovation initiatives.

The request for information announced today is an example of the CFPB’s new approach to promoting competition and new products. As announced in May, rather than providing special regulatory treatment of individual firms, the CFPB will seek to identify stumbling blocks for those seeking to challenge the status quo with new products or services. The Paperwork Reduction Act authorization for the CFPB’s Compliance Assistance Sandbox and No Action Letter Policies expires on September 30, 2022, so the CFPB will no longer be accepting or processing applications submitted through those Policies after that date

Read the Request for Information Regarding Mortgage Refinances and Forbearances . The deadline for submitting comments is 60 days after publication in the Federal Register.

Read Director Chopra’s prepared remarks at the Exchequer Club, discussing today’s announcement.

Visit the CFPB’s website to learn more about refinancing and loss mitigation.

Learn more about CFPB’s Office of Competition and Innovation.

Consumers having an issue with a consumer financial product or service can submit a complaint with the CFPB online or by calling (855) 411-CFPB (2372).

###

The Consumer Financial Protection Bureau is a 21st century agency that implements and enforces Federal consumer financial law and ensures that markets for consumer financial products are fair, transparent, and competitive. For more information, visit consumerfinance.gov.

los angeles seo company sevilla local media

PRESS RELEASE: CFPB Launches New Effort to Promote Competition and Innovation in Consumer Finance

Posted on by

FOR IMMEDIATE RELEASE:
May 24, 2022

CONTACT:
Office of Media Relations
press@cfpb.gov

CFPB Launches New Effort to Promote Competition and Innovation in Consumer Finance

New Office Will Identify Obstacles for New Market Entrants

WASHINGTON, D.C. – The Consumer Financial Protection Bureau (CFPB) is opening a new office, the Office of Competition and Innovation, as part of a new approach to help spur innovation in financial services by promoting competition and identifying stumbling blocks for new market entrants. The office will replace the Office of Innovation that focused on an application-based process to confer special regulatory treatment on individual companies. The new office will support a broader initiative by the CFPB to analyze obstacles to open markets, better understand how big players are squeezing out smaller players, host incubation events, and, in general, make it easier for people to switch financial providers.

“Competition is one of the best forms of motivation. It can help companies innovate and make their products better, and their customers happier,” said CFPB Director Rohit Chopra. “We will be looking at ways to clear obstacles and pave the path to help people have more options and more easily make choices that are best for their needs.”

The CFPB has a statutory mandate to promote fair, transparent, and competitive markets. Families, honest businesses, and the entire economy benefit when consumer finance markets are fiercely competitive, rather than dominated by a handful of firms. Digital technology is transforming the markets, including how payments, deposits, and lending are provided and who provides them. Big banks, fintech, big tech, incumbents, and small start-ups are all jockeying to be in front. The Office of Competition and Innovation will focus on how to create market conditions where consumers have choices, the best products win, and large incumbents cannot stifle competition by exploiting their network effects or market power.

The new office will support the CFPB’s general effort at increasing competition for the benefit of all consumers. Specifically, the CFPB will:

  • Give consumers their walking rights to switch providers: Competition is more vibrant when people can switch to a new provider easily, creating pressure on incumbents to maintain high levels of service and giving new entrants an opportunity to win customers. The CFPB will be exploring ways to reduce the barriers to switching accounts and providers.
  • Research structural problems blocking successes: The new office will be housed in the CFPB’s Research, Markets, and Regulation division, giving it greater access to resources to look at market-structure problems that create obstacles to innovation. For example, this could include greater explorations of the payment networks market or the credit reporting system, both of which are essential to our financial system but have only a few dominant players.
  • Understand how bigger players can gain advantage over smaller players: Sometimes start-ups simply get runover by bigger players. For example, big companies can easily pitch new products to their large customer bases and stymie outside players who may have more favorable products. Big tech companies, with their huge reaches, are also seeking new ways to join consumer finance markets and may threaten fair competition.
  • Identify ways to address commonplace obstacles: Innovators may not be getting their products or services to market because of more practical problems like access to capital or talent. Or they may not launch because they don’t have access to the large volumes of digital data stored by the big banks. A future rulemaking by the CFPB under Section 1033 of the Consumer Financial Protection Act will give consumers access to their own data. 
  • Host events to explore barriers to entry and other obstacles: The new office will convene events such as open houses, sprints, hackathons, tabletop exercises, and war games. Entrepreneurs, small business owners, and technology professionals will be able to collaborate, explore obstacles, and share frustrations with government regulators. Results will be shared publicly.

The Office of Competition and Innovation replaces the Office of Innovation, which opened in 2018, and Project Catalyst, launched in 2014. The Office of Innovation’s primary purpose was to process applications for No Action Letters and Sandboxes that applied to an individual company’s specific product offering. After a review of these programs, the agency concludes that the initiatives proved to be ineffective and that some firms participating in these programs made public statements indicating that the Bureau had conferred benefits upon them that the Bureau expressly did not.

The CFPB is also encouraging companies, start-ups, as well as members of the public to file rulemaking petitions to ask for greater clarity on particular rules. This will help level the playing field and foster competition by ensuring any actions the CFPB takes will apply to all companies in the market.

###

The Consumer Financial Protection Bureau is a 21st century agency that implements and enforces Federal consumer financial law and ensures that markets for consumer financial products are fair, transparent, and competitive. For more information, visit consumerfinance.gov