Apple Card Not Found to Violate Lending Laws, NYDFS Says

NYDFS Clears Apple Card of Discrimination Allegations

The New York State Department of Financial Services (NYDFS) has concluded its investigation into the Apple Card credit card program, finding no evidence of discriminatory practices, particularly concerning gender-based bias. This determination follows scrutiny sparked by online complaints originating in November 2019.

Initial Complaints and Investigation

The investigation was initiated after tech entrepreneur David Heinemeier Hansson publicly voiced concerns regarding the Apple Card program, a joint venture between Apple and Goldman Sachs. He reported receiving a credit limit significantly exceeding that offered to his wife, despite their joint tax filings and her superior credit score.

Hansson’s detailed account on Twitter quickly gained traction, prompting similar reports from others, including Apple co-founder Steve Wozniak, who shared comparable experiences with their partners during the application process.

Further amplifying the concerns, Jamie Heinemeier Hansson, David’s wife, published a blog post elaborating on her personal experiences.

The surge in consumer complaints prompted the NYDFS to launch a formal investigation into Goldman Sachs’ credit card practices, aiming to ascertain whether gender-based discrimination was indeed occurring.

Report Findings and Actions Taken

According to a report initially highlighted by Appleinsider, Goldman Sachs conducted a re-evaluation of credit files for some women who had initially received substantially lower credit limits than their spouses. Consequently, their limits were adjusted to align with those of their partners.

Simultaneously, the bank eliminated the previous six-month waiting period for appealing credit decisions.

These actions initially suggested potential flaws in the Apple Card algorithms, possibly leading to biased creditworthiness assessments; however, the Department’s findings indicate this was not the case.

Comprehensive Review Process

The NYDFS stated it meticulously reviewed thousands of pages of documentation and written responses from both Apple and Goldman Sachs. Investigators also conducted interviews with witnesses and representatives from both companies.

Furthermore, the Department analyzed underwriting data encompassing nearly 400,000 New York applicants and engaged directly with consumers who had lodged complaints of discrimination.

No Unlawful Discrimination Found

The Department ultimately concluded that no “unlawful discrimination” against applicants was present under fair lending laws. However, Linda A. Lacewell, Superintendent of Financial Services, emphasized the persistent disparities within the credit lending system and the potential for unequal access to credit due to credit scores.

“While our inquiry revealed no fair lending violations, it serves as a crucial reminder of the ongoing disparities in credit access, nearly half a century after the passage of the Equal Credit Opportunity Act (ECOA),” Lacewell stated.

She further noted the need to strengthen and modernize existing laws and regulations to enhance credit access, and highlighted the importance of addressing consumer frustration with the Apple Card’s policy regarding authorized users.

Underlying Factors and Systemic Issues

A common theme among complainants was the expectation that spouses sharing bank accounts or other assets, even as authorized users, would receive equivalent credit terms. However, current underwriting practices do not mandate treating authorized users the same as primary account holders.

The investigation revealed that Goldman Sachs was able to justify its lending decisions based on factors such as spouses’ credit scores, debt levels, income, credit utilization, and payment history – none of which constituted an “unlawful basis” for credit determination.

The Department acknowledged that the credit score system itself often disadvantages women, frequently due to their roles as primary caregivers and the mechanics of the scoring model. While this represents a systemic issue requiring reform, the Apple Card program’s lending decisions were deemed “lawful” in this context.

Transparency and Appeals Process

The Department also noted a lack of transparency surrounding Apple Card’s lending decisions, observing that while data was provided for the investigated complaints, the affected consumers were unable to access it themselves.

It suggested that Apple could enhance its appeals process, eliminating the six-month waiting period.

Apple’s Response and Future Improvements

Apple has responded to these concerns by launching “Path to Apple Card,” a program designed to guide applicants toward approval. Over 70,000 consumers have enrolled, with nearly 5,000 subsequently approved.

The company has also updated its website with more detailed information about the approval process and is implementing support for Apple Card family sharing features, allowing authorized users to benefit from higher credit limits.

This investigation underscored the challenges Apple faces when associating its trusted brand with traditional lending practices and the importance of transparency in building consumer trust.

Statements from Goldman Sachs and David Heinemeier Hansson

Goldman Sachs released a statement acknowledging the investigation’s findings and reaffirming its commitment to fair and equal access to credit.

“We appreciate the Department of Financial Services’ thorough investigation and welcome its conclusion of no fair lending violations. We remain committed to providing fair and equal access to credit,” the company said.

David Heinemeier Hansson, whose initial tweet sparked the investigation, expressed skepticism, stating the report resembled a “press release from Goldman Sachs” and failed to address the specifics of his case.

“This read like a press release from Goldman Sachs, and ignores the specific facts in our case. My wife had a HIGHER credit score than I did, yet was determined to be worth a tenth the credit. There’s zero transparency in the credit assessment process, applicants can’t tell why they’re being denied, and Goldman Sachs and Apple employees don’t even seem to know. The algorithmic black box outcomes continue, there’s no possibility of doing audits, and unfair outcomes continue. Total regulatory failure,” he commented.

Updated 3/23/21, 3 pm et with comments after initial publication.