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Vendors Blame Apple Card Growth, Goldman Card Business Failure

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Apple CEO Tim Cook introduces Apple Card at the launch event at Apple’s headquarters in Cupertino, Calif., on Monday, March 25, 2019.

Noah Berger | AFP | Getty Images

When it was announced in 2019, Apple pitched its new credit card as a game changer with unprecedented levels of simplicity and transparency.

But the card’s rapid growth and the new platform Goldman Sachs has built to offer it have created difficulties behind the scenes, according to people familiar with the matter, resulting in the company becoming more of a customer-first disruptor. However, there were also failures reminiscent of conventional issuers.

Goldman has been struggling to cope with an unexpected influx of disputed deals, known in the industry as chargebacks, according to people familiar with the matter. A chargeback occurs when a customer asks for a refund of a product or service charged to their card for any reason. Disputes that put banks in the middle of disagreements between customers and merchants surged during the pandemic, according to payments consultants.

If an Apple Card user disputes a transaction, Goldman must seek a resolution within regulatory deadlines, which it may fail to do, said the people, who asked not to be identified. . Customers said they were given conflicting information and had long waits.

A source said Goldman had more controversy than expected. “We have these queues that need to be cleared within a certain amount of time. Our business got so big that suddenly we had to create more automation to deal with it.”

Goldman Sachs declined to comment for this article, and an Apple representative did not immediately respond to a request for comment.

“Complete nightmare”

Problems with Goldman’s cards business came to the fore on Aug. 4 when the New York-based investment bank revealed that the Consumer Financial Protection Bureau had investigated various billing and service issues. became known. (Goldman didn’t mention Apple in the filing, but most of his $11.84 billion in card loans to date have come from Apple Card, and the bank added his GM in January. Launched a branded card.)

Regulators are “investigating Goldman’s transactions with clients, including applying refunds, crediting nonconforming payments, resolving billing errors, advertising and reporting to credit bureaus,” the bank said.

Regulators have focused on customer complaints over the past few years, with the biggest cause being attempted chargebacks, the people said.

Disputes can be difficult to resolve. Customers sometimes try to cheat the system by seeking refunds for legitimate purchases. In other cases, merchants who always stay away. Refunds involving identity theft or items not received should be clarified, but there are also more subtle cases where customers complain that an event like a music festival failed to meet its claims.

Some users on online credit card forums complained that Goldman initially refused to take their side, even though they provided evidence of fraud.

According to a Reddit post, “Goldman Sachs is holding me accountable for a $930 charge made at an Apple Store using Apple Pay that I didn’t make.” “Never before have I experienced unprofessional service from a large company. This was a complete nightmare.”

edge case

The bank had an automated way for customers to record customer disputes via iPhones, but hadn’t done much work to streamline the resolution of such cases, according to people familiar with the matter. It did not initially describe what insiders considered “edge cases” or situations that deviated from the norm in the majority of transactions, they said.

“We were claiming there would be a seamless way to dispute the deal,” the source said. .”

Another piece of the puzzle was that Goldman relied on three outside vendors to serve its Apple Card customers. Known as the Business Process Organization (BPO), this department has high employee turnover and is likely to have new or poorly trained personnel.

According to trade publication 9to5Mac, Apple sent a notice in February giving some cardholders the chance to resubmit old disputes.

The email acknowledged that Apple “confirmed that some customer-initiated disputes may not have been properly resolved,” according to the report.

growing pains

Indeed, there are many customers on Reddit who say they had a good experience with the Apple Card. This product received an award from his JD Power for Customer Satisfaction last year.

Sources cited the bank’s troubles as growing pains for new businesses that have seen an unprecedented surge in customers.By May 2021, Apple Card user numbers will double from the previous year, according to Cornerstone Advisors. reached 6.4 million. Goldman’s outstanding loans nearly doubled last year, according to the Nilsson Report.

Goldman is still a relatively new company in the US credit card industry, and the Apple Card is the biggest step into the financial life of ordinary Americans. While major card players rely on decades-old technology systems, the investment bank has opted to build its own platform, the people said.

Following regulatory scrutiny, Goldman has reallocated resources and further automated its chargeback process, one of the people said.

Meanwhile, disgruntled Apple Card users say on online forums that there’s one surefire way to improve Goldman’s response.

“After six calls, three supervisors, and four months of waiting, it was magically resolved,” wrote one Reddit poster. It was resolved a few days after I filed the CFPB complaint I described.If you come across the same thing, please file a complaint with the CFPB.”