Apple CEO Tim Cook introduces the Apple Card during a launch event at Apple headquarters Monday, March 25, 2019, in Cupertino, California.
Noah Berger | AFP | Getty Images
When it was unveiled in 2019, Apple promoted its new credit card as a game changer with unheard of levels of simplicity and transparency.
Behind the scenes, however, the card’s rapid growth and the new platform built by Goldman Sachs to serve it created difficulties, resulting in failures more reminiscent of a traditional issuer than a customer-first switch, according to people with knowledge of the matter. for this matter.
Goldman struggled to cope with a larger-than-expected influx of controversial transactions, known in the industry as fee reversals, according to the people. Chargebacks occur when a customer requests a refund for a product or service billed to their card for a variety of reasons. Disputes, which put banks in the middle of disputes between customers and merchants, have increased during the pandemic, according to payments consultants.
When an Apple Card user disputes a transaction, Goldman must seek a resolution within the timeframes mandated by the regulator, and has sometimes failed to do so, said the people, who requested anonymity to speak candidly about the situation. Customers were sometimes given conflicting information or had long wait times, the people said.
Goldman had more disagreements than expected, a source said. “You have these queues that you have to clear within a certain amount of time. The business was getting 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.
‘A complete nightmare’
Problems at Goldman’s card business burst into the public eye on Aug. 4, when the New York-based investment bank disclosed a Consumer Financial Protection Bureau investigation into a series of billing and service issues. (Goldman did not mention Apple in the filing, but most of its $11.84 billion in card loans to date are from the Apple Card; the bank launched a GM-branded card in January.)
The regulator is looking into Goldman’s customer relations, “including enforcement of refunds, crediting of non-conforming payments, resolution of billing errors, advertising and reporting to credit bureaus,” the bank said.
Regulators have focused on customer complaints in recent years, and the largest source of them came from fee-back efforts, the people said.
Disputes can be difficult to resolve: customers sometimes try to game the system by asking for refunds for legitimate purchases. In other cases, its dealers who are not always ready. While refunds involving identified theft or items that were never received should be straightforward, there are also more nuanced cases where customers complain that an event like a music festival didn’t fit the bill.
In online credit card forums, some users complained that Goldman initially refused to side with them despite providing evidence of fraud.
“Goldman Sachs is holding me liable for a $930 charge that was made at an Apple store with Apple Pay that I didn’t make,” according to a post on Reddit. “Until now, I have never experienced less than professional service from a major company, and this has been an absolute nightmare.”
While the bank had automated ways for customers to log customer disputes through their iPhones, it had done less to improve the resolution of such cases, according to the people. The bank had not initially accounted for what insiders considered “edge cases” or situations that deviate from the norm in the vast majority of transactions, they said.
“We were making the case that we have a seamless way to dispute transactions,” the source said. “But we didn’t get any credit on the front end and we had some failures on the back end.”
Another piece of the puzzle is that Goldman relied on three outside vendors to help serve Apple Card customers. Known as business process organizations or BPOs, the sector often struggles with high employee turnover, increasing the chances that a representative will be new or not fully trained.
In February, Apple sent some card users a notice giving them a chance to resubmit old disputes, according to industry publication 9to5Mac.
The email acknowledged that Apple had “identified that some customer-initiated disputes may not have been resolved correctly,” according to the report.
To be sure, there are plenty of customers on Reddit who say they’ve had good experiences with Apple Card. The product won an award from JD Power for customer satisfaction last year.
Sources referred to the bank’s issues as the growing pains of a new business that saw an unprecedented increase in customers. Apple Card users doubled to 6.4 million by May 2021 from a year earlier, according to Cornerstone Advisors. Goldman’s outstanding loans nearly doubled last year, according to the Nilson Report.
Goldman is still a newcomer to the U.S. credit card industry, and the Apple Card represented its biggest step yet into the financial lives of ordinary Americans. While major card players rely on decades-old technology systems, the investment bank chose to build its own platform, the people said.
In response to regulatory scrutiny, Goldman redirected resources to automate more of the fee-return process, one of the people said.
Meanwhile, frustrated Apple Card users on online forums said there was a safe way to improve Goldman’s response.
After “6 phone calls, 3 supervisors and 4 months of waiting, it was magically resolved,” wrote one Reddit poster. “Suspiciously, it was resolved a few days after I filed a CFPB complaint stating all of my issues. If you run into the same thing, FILE A COMPLAINT WITH THE CFPB.”