The Apple Card program did not violate fair lending laws, according to the New York Treasury Department
The New York Treasury Department (NYDFS) today released a report that exempted the Apple Card credit card program from discriminatory practices, particularly gender, following an investigation triggered by online complaints back in November 2019. Tech Entrepreneur David Heinemeier Hansson had called on the Apple and Goldman Sachs jointly operated Apple Card program for gender discrimination after receiving a credit limit 20 times higher than what was offered to his wife – despite the couple’s joint tax returns had submitted and his wife had a higher credit score than him.
Hansson’s tweet storm detailing the issue goes viral, generating responses from several others, including Apple co-founder Steve Wozniak, who claimed they had similar experiences while applying for the Apple Card with their partners.
The @AppleCard is one hell of a sexist program. My wife and I filed a joint tax return, live in a community-owned state, and have been married for a long time. However, Apple’s black box algorithm thinks I make 20 times their credit limit. No vocations work.
– DHH (@dhh), November 7, 2019
We have 10 times the Apple Card credit limit. We don’t have any assets or accounts that are segregated at all. With the exception of this Apple Card, which did not have a joint account. I’m with you.
– Steve Wozniak (@stevewoz) November 10, 2019
David’s wife, Jamie Heinemeier Hansson, also wrote a blog post documenting her experiences in more detail.
The story goes on
The numerous consumer complaints soon caught the attention of the New York Treasury Department, which opened an investigation into Goldman Sachs’ credit card practices to determine whether there was alleged gender discrimination.
The NYDFS report, first spotted by Appleinsider today, finds that Goldman Sachs re-examined the credit records of some women who were originally offered dramatically lower credit scores than their spouses and decided to raise their limits to suit them of to match their spouse. At this point, the bank also eliminated the six-month waiting period for appeals to credit decisions.
These measures appeared to indicate that Apple Card algorithms were taking poor credit scores, possibly even based on gender. However, the department says it doesn’t – despite emphasizing the need for creditworthiness reforms and updating existing laws on access to credit.
NYDFS said it reviewed thousands of pages of Apple and Goldman Sachs records and written responses, interviewed witnesses, met representatives from Apple and the bank, and analyzed the bank’s underwriting data using a dataset that covers nearly 400,000 New York applicants. Consumers who complained about discrimination were also interviewed.
The ministry concluded that there was no “unlawful discrimination” against applicants under the Fair Lending Act. However, statements by Financial Services Superintendent Linda A. Lacewell emphasized that the lending system itself is still discriminated against and that credit scores can lead to unequal access to credit.
“While we found no fair lending violations, our research recalls differences in access to credit that persist nearly 50 years after the Equal Credit Opportunity Act (ECOA) was passed,” said Lacewell. “The report also notes that the use of credit scoring in its current form, as well as laws and regulations that eliminate discrimination in lending, need to be strengthened and modernized to improve access to credit. The frustration of the Consumers about Apple Card’s policy not to allow an account holder to do so. Adding an authorized user made the following aware: An individual who relies on a spouse’s access to credit and only accesses those accounts as an authorized user may incorrectly believe that she has the same credit profile as the spouse. This is part of a We need to have a wider discussion about equal access to credit, “she added.
A common factor among consumers who complained was the belief that a spouse who had access to the same shared bank account or other shared asset such as credit cards – even if only as an authorized user – would receive the same credit terms as their spouses would. With the system working today, insurers do not need to consider an authorized user as an account holder, and they can consider other factors as well. Taken together, these resulted in the lower credit decisions, the research found.
The department said Goldman Sachs, upon request, was able to document the underwriting that governed its credit decisions for the consumer complaints. Gender wasn’t a factor, but spouses credit scores, debt, income, loan use, missed payments, and other elements of credit history were. None of the identified factors was an “unlawful basis” for a credit investigation, the department said.
Of course, the credit score system itself is one that generally favors men. (And especially white men). There is no single reason why this is the case, rather it has to do with the role of the woman as the primary caregiver in connection with how the credit scoring model works. This is a system that needs reform, but since it relates to the Apple Card program and discrimination complaints, it was “lawfully” used to make the Apple Card credit decisions.
However, the department pointed out that Apple Card’s lending decisions were not transparent enough – noting that while affected consumers could get the data about the bank’s decision on these complaints, they could not. It was also suggested that Apple could have offered a more robust appeal process instead of having to wait six months.
Apple has since responded to some of the issues raised, including by launching Path to Apple Card last year, which allows applicants to follow steps leading to Apple Card approval. To date, more than 70,000 consumers have signed up for this program and nearly 5,000 have been approved. Apple has also updated its website with more information on how Apple Card permissions work. And now it’s adding support for functionality to share Apple Card families – that is, for authorized users. This would address issues related to spouses who are at least not given access to the higher lending limits.
That research, however, highlighted the problems Apple faced when pairing its trusted brand with a credit card issued by a traditional lender, and the associated lousy banking practices that consumers hate, as well as the lack of transparency of trust in those struck Credit decisions.
Apple has not yet commented on the NYDHS report at this point.
Hansson, whose original tweet started this whole investigation, has this to say:
“This reads like a Goldman Sachs press release, ignoring the specific facts in our case. My wife had a higher credit score than me, but was determined to be worth one-tenth the loan. There is no transparency in the credit assessment process applicants can use don’t say why they’re rejected, and Goldman Sachs and Apple employees don’t even seem to know. The black box algorithmic results continue, there is no way to audit, and unfair results continue. “”