Apple Card’s rapid growth, outside vendors blamed for mishaps within Goldman’s credit-card business

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

Behind the scenes, however, the card’s rapid growth and the new platform Goldman Sachs built to service it created difficulties that led to breakdowns more reminiscent of a traditional issuer than a customer-first disruptor, according to people familiar with the matter.

Goldman is struggling to deal with a larger-than-expected influx of disputed transactions, known in the industry as chargebacks, according to the people. A chargeback occurs when a customer requests a refund for a product or service charged to their card for several reasons. Disputes that 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 regulatory deadlines and sometimes fails to do so, said the people, who spoke on condition of anonymity to speak candidly about the situation. Customers sometimes get conflicting information or wait a long time, the people said.

Goldman got more controversy than it bargained for, one 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 handle it.”

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

Problems at Goldman’s card business burst into the public domain on Aug. 4 when the New York-based investment bank disclosed a Consumer Financial Protection Bureau investigation into a range of billing and service problems. Goldman did not mention Apple in the filing, but most of its $11.84 billion in card loans to date have come from Apple Card; the bank launched a GM-branded card in January.

The regulator is investigating Goldman’s customer relations, “including in relation to the application of refunds, crediting of non-conforming payments, resolution of billing errors, advertisements and reporting to credit bureaus”, the bank said.

Regulators have been focused on customer complaints for the past few years, and the biggest source of those have come from attempts to recover payments, the people said.

Disputes can be difficult to resolve: Customers sometimes try to cheat the system by asking for refunds for legitimate purchases. In other cases, its traders who are not always forthcoming. While refunds involving identity theft or items that were never received should be clear, there are more nuanced cases where customers complain that an event like a music festival doesn’t qualify.

In online credit card forums, several 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 one Reddit post. “I have never experienced less than professional service from a large company before and it was a total nightmare.”

While the bank had automated ways for customers to log disputes through their iPhones, it had done less to streamline the resolution of such cases, the people said. The bank initially failed to account for what insiders considered “edge cases,” or situations that deviated from the norm, among the vast majority of transactions, they said.

“We’ve been touting that we have a seamless way to dispute transactions,” the source said. “But we didn’t get credit on the front end and we had some setbacks on the back end.”

Another piece of the puzzle is that Goldman relies on three outside vendors to serve Apple Card customers. Known as business process organizations, or BPOs, the sector often struggles with high worker turnover, which increases the likelihood 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 “found that some customer-initiated disputes may not be properly resolved,” according to the report.

There are also many 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.

People familiar with the matter pointed to the bank’s problems as growing problems for a new business that has seen an unprecedented surge in customers. Apple Card users doubled to 6.4 million by May 2021 from a year earlier, according to Cornerstone Advisors. Goldman’s defaulted loans nearly doubled last year, according to the Nilson report.

Goldman is still a relative newcomer to the U.S. credit card industry, and the Apple Card represents the biggest step yet in the financial lives of ordinary Americans. While major card players have relied on technology systems for decades, the investment bank chose to build its own platform, the people said.

In response to regulatory scrutiny, Goldman has shifted resources to automate more of the chargeback process, one of the people said.

Meanwhile, frustrated Apple Card users in online forums said there was one surefire 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 this was resolved a few days after I filed a complaint with the CFPB stating all my concerns. If you come across the same thing, FILE A COMPLAINT with the CFPB.”