• Faisal Khalid

The Apple-Goldman Sachs credit card controversy explained

Updated: Jan 29

The Apple-Goldman Sachs credit card has been in the news today following a series of derogatory tweets by David Hanson, the founder of Ruby on Rails.

You can read the tweets here:

Hanson narrates the story of how both he and his wife applied for Apple Credit Cards, and despite his wife having a higher credit score than him, and despite them filing a joint tax return, the credit limit he got was 20x higher than that given to his wife.

He goes on to allege gender discrimination.

Without rising to defend or criticise these claims, I did want to comment on why this happens.

From a lender’s perspective, the reason for doing this - restricting credit limits of the second family member - is really quite straightforward. It has to do with limiting credit exposure to a given household.

That Hanson’s spouse is a woman may well have nothing to do with this at all. Hanson could have been married to a guy, and it would have been the same outcome. The fundamental issue is this: when lenders see two applicants from the same family, in a short period of time (in this case it seems they may have applied together or not too far apart from each other), it actually triggers fraud warnings more than anything else.

In the brief experience we’ve had at Bits so far, the biggest signal we’ve had of people not likely to pay back, is referring family members, or having multiple members of the same family apply in quick succession. I am not quite sure what the psychology of this is, but all I now is what I’ve seen, which is that multiple family members applying together or very soon after each other, FOR A LENDING PRODUCT, is a big red flag.

In our case, whenever this happened, it was always the male member of the family who applied first. Hence, he was usually approved (if he met our criteria). And it was the female member - wife - who applied next. We actually approved both sets of family members, but if we were to do it again, we wouldn’t repeat our mistake. It is an unfortunate fact that when multiple people from the same family apply for the same lending product together or in a very short space of time - it means there’s a very high likelihood of default. I’m not saying it’s always this way - I’m saying, based on the actual experiences I’ve had - that it normally (in the majority of cases) is this way.

But this really then gets at the heart of the biggest issue lenders like ourselves have: which is, how do we tell good actors apart from bad actors? There’s no perfect way, and despite lending being arguable the oldest business in the world, we still have to rely on crude methodologies which end up in some very legitimate people (e.g. Hanson’s wife, in this case) being victims.

I’m keen to see how Apple gets itself out of this pickle.

They definitely do have the data to disprove gender discrimination allegations - the question is whether they will share it or not. The easiest way to disprove that this was gender discrimination was to share data that shows them having behaved in the same way - i.e. giving the second family member a much much lower limit than the first one - in situation where the wife applied first, and the husband second. Apple, if you’re listening, please share this data. Let’s end these wild allegations now.

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