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Goldman Sachs' consumer banking growing pains

Lucinda Shen
Aug 5, 2022
Illustration of a hand holding a magnifying glass over a stack of papers.
Illustration: Aïda Amer/Axios

The Consumer Financial Protection Bureau is investigating Goldman Sachs' credit card unit over its account management practices, billing error resolutions, advertisements, and reporting to credit bureaus.

Why it matters: It has been six years since the investment banking giant began its Main Street push in earnest — and, so far, the results have been lackluster. A CFPB probe is unlikely to help.

What they're saying: "The firm is cooperating with the Consumer Financial Protection Bureau," the bank's disclosure read.

Flashback: This isn't the first time Goldman's credit unit has faced a regulatory probe in its short life. In 2019, the New York State Department of Financial Services looked into the company amid allegations of sexist credit decisions by the Apple Card (which is issued by Goldman).

  • The agency eventually said it found no evidence to support the allegations.

Context: Goldman Sachs' $11.8 billion book of loans out to consumers is not huge. (Synchrony Bank, by comparison, had about $78 billion out by mid-2022).

  • It has, however, created plenty of buzz as the traditionally investment-banking-focused giant seeks more stable revenues from the average Joe.

The bigger picture: Goldman Sachs is an old name on Wall Street, but it is still inexperienced when it comes to consumer underwriting.

  • "When Goldman launched this initiative with Apple and credit cards, they were new to the business," Stephen Biggar of Argus Research says. "They hired experienced people, but it is still a new business for them."
  • Notably, as with younger fintechs, loan losses for Goldman's credit cards appear to be rising much faster than those at established consumer-facing banks, he says.

💭 Thought bubble: To some extent, Goldman faces the same problem that plagued Facebook's crypto project: Its big, polarizing, regulator-attracting name.

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