Apple Inc. pitches its new card as a model of simplicity and transparency, upending everything consumers think about credit cards.
But for the card’s overseers at Goldman Sachs Group Inc., it’s creating the same headaches that have bedeviled an industry the companies had hoped to disrupt.
Social media postings in recent days by a tech entrepreneur and Apple co-founder Steve Wozniak complaining about unequal treatment of their wives ignited a firestorm that’s engulfed the two giants of Silicon Valley and Wall Street, casting a pall over what the companies had claimed was the most successful launch of a credit card ever.
Goldman has said it’s done nothing wrong. There’s been no evidence that the bank, which decides who gets an Apple Card and how much they can borrow, intentionally discriminated against women. But that may be the point, according to critics. The complex models that guide its lending decisions may inadvertently produce results that disadvantage certain groups.
The problem -- in Washington it’s referred to as “disparate impact” -- is one the financial industry has spent years trying to address. The increasing use of algorithms in lending decisions has sharpened the years-long debate, as consumer advocates, armed with what they claim is supporting research, are pushing regulators and companies to rethink whether models are only entrenching discrimination that algorithm-driven lending is meant to stamp out.
“Because machines can treat similarly-situated people and objects differently, research is starting to reveal some troubling examples in which the reality of algorithmic decision-making falls short of our expectations, or is simply wrong,” Nicol Turner Lee, a fellow at the Center for Technology Innovation at the Brookings Institution, recently told Congress.
Wozniak and David Heinemeier Hansson said on Twitter that their wives were given significantly lower limits on their Apple Cards, despite sharing finances and filing joint tax returns. Wozniak said he and his wife report the same income and have a joint bank account, which should mean that lenders view them as equals.
One reason Goldman has become a poster child for the issue is that the Apple Card doesn’t let households share accounts -- the way much of the industry does. That could lead to family members getting significantly different credit limits. Goldman says it’s considering offering the option.
With this month’s snafu, Goldman has found itself in the middle of one of the thorniest laws in finance: the Equal Credit Opportunity Act. The 1974 law prohibits lenders from considering sex or marital status and was later expanded to prohibit discrimination based on other factors including race, color, religion, national origin and whether a borrower receives public assistance.
The issue gained national prominence in the 1970s when Jorie Lueloff Friedman, a prominent Chicago television anchor, began reporting on her own experience with losing access to some of her credit card accounts at local retailers after she married her husband, who was unemployed at the time. She ultimately testified before Congress, saying “in the eyes of a credit department, it seems, women cease to exist and become non-persons when they get married.”