March 23, 2021
DFS ISSUES FINDINGS ON THE APPLE CARD AND ITS UNDERWRITER GOLDMAN SACHS BANK
No Fair Lending Violations Found
More Broadly, Report Stresses Need for Modernizing Credit Scoring Models and Updating Anti-Discrimination Laws Governing Credit Access
The New York State Department of Financial Services (the “Department”) today issued a report summarizing the Department’s findings after investigating consumer complaints about the Apple Card. The investigation, which included a review of several thousand pages of records and written responses from Goldman Sachs Bank (the “Bank”) and Apple, interviews of witnesses and Apple Card applicants, and analysis of underwriting data for approximately 400,000 New York State applicants for the Apple Card, did not produce evidence of unlawful discrimination against applicants under fair lending law.
“While we found no fair lending violations, our inquiry stands as a reminder of disparities in access to credit that continue nearly 50 years after the passage of the Equal Credit Opportunity Act (ECOA) ,” said Superintendent of Financial Services Linda A. Lacewell. “The report also notes that the use of credit scoring in its current form and laws and regulations barring discrimination in lending are in need of strengthening and modernization to improve access to credit. Consumer frustration with the Apple Card policy of not permitting an account holder to add an authorized user drew attention to the following: a person who relies on a spouse's access to credit, and only accesses those accounts as an authorized user, may incorrectly believe they have the same credit profile as the spouse. This is one part of a broader discussion we must have about equal credit access.”
The report describes how consumers can responsibly build credit. It also addresses how traditional credit scoring and the lack of access to affordable and quality credit perpetuates inequality by inhibiting the ability of those with fewer resources to build wealth.
In the course of the investigation, consumers expressed the belief that they should have received the same Apple Card offers as their spouses because they shared bank accounts and other assets. For example, consumers voiced the belief that if they shared credit cards with spouses, even if only as authorized users, they were entitled to the same credit terms as spouses. In reality, however, underwriters are not required to treat authorized users the same as account holders, and may consider many other factors.
In terms of gender, the Department found, based on its data analysis, that Apple Card applications from women and men with similar credit characteristics generally had similar outcomes. For all consumers who reported concerns about their Apple Card credit application outcomes to the Department, evidence showed that those decisions were explainable, lawful, and consistent with the Bank’s credit policy. However, the Department concluded, deficiencies in customer service and a perceived lack of transparency undermined consumer trust in fair credit decisions.
The report notes that Goldman Sachs and Apple have since taken steps to improve transparency, implemented a program to assist denied applicants in improving their credit with the goal of obtaining Apple Card approval, and modified a policy that previously required approved applicants to wait six months before appealing credit terms.
The report also addresses:
- the manner in which credit scores are calculated, and the importance of consumers reviewing their own credit scores to ensure accuracy;
- responsible methods of building credit, and the pros and cons of “authorized user” status; and
- historical discrimination reflected in and perpetuated by creditors’ use of traditional, even lawful, creditworthiness criteria.