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Goldman faces restrictions on issuing new credit cards

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Apple ( AAPL ) 'strongly' disagrees with how agency described its

conduct

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Chopra says alleged misconduct caused 'real harm to real

people'

By Douglas Gillison

Oct 23 (Reuters) - Corporate giants Goldman Sachs ( GS )

and Apple ( AAPL ) will pay $89 million for violations of

consumer protection laws in their joint credit card business

that affected hundreds of thousands of people, the U.S. Consumer

Financial Protection Bureau announced Wednesday.

In a partnership to finance Apple ( AAPL ) customers' purchases through

the Apple ( AAPL ) credit card that Goldman is now seeking to unwind, the

two companies allegedly mishandled transaction disputes and

misled iPhone purchasers about whether their purchases were in

fact interest-free, according to the agency.

In addition to penalties and consumer redress, Goldman will

face restrictions on its ability to issue new credit cards, the

announcement said.

Rohit Chopra, the director of the agency, said the alleged

misconduct had caused "real harm to real people."

"This led to wrongful charges, mishandled disputes and damaged

credit reports," he told reporters, noting that the purchase of

an Apple ( AAPL ) device was often a major expense for families.

In a statement, Goldman said it was pleased to have resolved

the matter.

"We worked diligently to address certain technological and

operational challenges that we experienced after launch and have

already handled them with impacted customers," the statement

said.

Apple ( AAPL ) said it "strongly" disagreed with how the consumer

protection agency described its conduct but had nevertheless

reached an agreement.

"Upon learning about these inadvertent issues years ago,

Apple ( AAPL ) worked closely with Goldman Sachs ( GS ) to quickly address them

and help impacted customers," a spokesperson said.

Goldman now faces a costly exit from the 2019 Apple ( AAPL ) partnership

that is seen by other lenders as too risky and unprofitable,

sources told Reuters in December last year.

Since its foray into consumer banking flopped, Goldman has

refocused on its traditional mainstays - investment banking and

trading. The consumer business that CEO David Solomon championed

has lost billions of dollars.

According to the consumer protection agency, Apple ( AAPL ) failed to

send Goldman tens of thousands of consumer disputes and in cases

when it did, the bank failed to review them in accordance with

the law.

Consumers faced long waits for refunds and saw their credit

histories unfairly damaged, the agency said. The companies also

allegedly misled card users about interest-free payments for

Apple ( AAPL ) devices, with many actually steered toward purchases with

interest - in some cases, the interest-free option only appeared

when online consumers made purchases using Apple's ( AAPL ) web browser,

according to the agency.

"We found that if consumers were not using the Safari

browser or were using a Safari browser in privacy mode, the

option did not come up at checkout," Eric Halperin, the agency's

enforcement director, told reporters.

Agency officials said Apple ( AAPL ) will have to produce a plan for

complying with consumer protection laws as it continues to offer

these services. Should Goldman seek to issue a new credit card,

it will be required to submit a compliance plan 90 days in

advance, according to the agency.

Goldman will pay $19.8 million in consumer redress and a

$45 million fine while Apple ( AAPL ) is due to pay a $25 million fine,

according to the agency.