Goldman credit card business under investigation by consumer finance watchdog

Goldman Sachs has admitted to more difficulties for its lossmaking foray into retail banking, disclosing that the US consumer finance regulator is investigating how it manages accounts in its credit card business.

In a regulatory filing on Thursday, Goldman said it was co-operating with an investigation by the Consumer Financial Protection Bureau into “the application of refunds, crediting of nonconforming payments, billing error resolution, advertisements and reporting to credit bureaus” at its credit card business.

Goldman has issued two credit cards through corporate partnerships — its flagship Apple Card and one with General Motors. Apple and GM did not immediately respond to requests for comment. The CFPB said it does not comment on confidential supervisory and enforcement matters and investigations.

The CFPB investigation is a legal headache for a Goldman business that only generated about 2 per cent of the bank’s $59 billion (€56.7 billion) in net revenues last year.

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It had about $12 billion in credit card balances at the end of June, up from $5 billion a year earlier.

That is dwarfed by established rivals such as JPMorgan Chase, which had $165 billion in credit card loans last quarter, reflecting Goldman’s much more recent push into main street banking.

Goldman, which generates the vast majority of its earnings from Wall Street trading and investment banking, entered consumer banking in 2016 through the launch of its Marcus brand, a nod to its co-founder Marcus Goldman.

It grew out of Goldman’s conversion during the 2008 financial crisis into a bank holding company, a move that allowed it to access liquidity lines from the Federal Reserve and secure US government-backed insurance for its deposits.

The consumer business, which in addition to credit cards also includes Marcus-branded savings accounts and lending, generated $1.5 billion in revenue last year. The bank is aiming to push revenue above $4 billion by 2024.

However, the business is still lossmaking and Goldman has yet to outline a timetable for when it will be profitable. Goldman’s three other growth initiatives — asset management, wealth management and transaction baking — are profitable.

The consumer business has also cycled through a series of leaders. Harit Talwar, the first head of Marcus and the former US cards boss at Discover, in 2021 handed over day-to-day management to his longtime deputy, Omer Ismail. But Ismail abruptly departed Goldman for Walmart.

The consumer business is now run by Peeyush Nahar, who joined Goldman last year, having previously worked at Uber and Amazon. – Copyright The Financial Times Limited 2022