Regulators investigate Goldman for Apple Card discrimination

Regulators launched an investigation into Goldman Sachs’ credit card business after a customer complained about getting a lot higher credit than his wife.

Mekhla Raina and Elizabeth Dilts reported the news for Reuters:

A probe into Goldman Sachs Group Inc’s credit card practices has been initiated after tweets from a tech entrepreneur alleged gender discrimination in the new Apple Inc card algorithms that are used to determine credit limits.

In a series of Twitter posts starting on Thursday, David Heinemeier Hansson railed against the Apple Card for giving him 20 times the credit limit that his wife got, Bloomberg reported on Saturday.

Hansson, who is the creator of web-application framework Ruby on Rails, didn’t disclose any specific income-related information for himself or his wife but said they filed joint tax returns and that his wife had a better credit score, the report said. New York’s Department of Financial Services confirmed that an investigation was being conducted. Andrew Williams, a Goldman Sachs spokesman, declined to comment on whether Hansson had contacted Goldman regarding the concerns raised on Twitter because the bank does not discuss matters involving individual customers publicly.

The New York Times’ Neil Vigdor quoted a statement by the New York State Department of Financial Services:

“Any algorithm that intentionally or not results in discriminatory treatment of women or any other protected class violates New York law,” an agency spokeswoman said in a statement on Saturday night.

“DFS is troubled to learn of potential discriminatory treatment in regards to credit limit decisions reportedly made by an algorithm of Apple Card, issued by Goldman Sachs, and the Department will be conducting an investigation to determine whether New York law was violated and ensure all consumers are treated equally regardless of sex,” the statement said.

An Apple spokeswoman directed questions to a Goldman Sachs spokesman, Andrew Williams, who said that the company could not comment publicly on individual customers.

“Our credit decisions are based on a customer’s creditworthiness and not on factors like gender, race, age, sexual orientation or any other basis prohibited by law,” Mr. Williams said.

CNBC’s Emma Newburger wrote:

Hansson, the creator of the programming tool Ruby on Rails, said that after his complaints Goldman bumped up his wife’s credit limit without requesting any additional documentation or addressing the root of the issue. Goldman’s customer service representatives could not explain what happened, but repeatedly explained that “It’s just the algorithm,” according to Hansson.

“It does not matter what the intent of individual Apple reps are, it matters what THE ALGORITHM they’ve placed their complete faith in does,” Hansson wrote. “And what it does is discriminate.”

Congress has scrutinized the use of algorithms by lenders in credit decisions. The House Financial Services Committee in June held hearings on instances of bias against certain groups within algorithms, even when there was no intent to discriminate.

In most cases, the issue could stem from the fact that the Apple Card is only for individual accounts, not joint accounts, according to a person with knowledge of the issue. If Hansson’s wife is judged on her own income and is part of a high-earning and spending household, then her credit utilization could potentially look high relative to her own income, thus resulting in a low credit limit, the person said.