Apple Faces New Regulatory Reality With Credit Card Launch
Apple's move to branch out from retail and offer financial services means it will need to heed a host of new federal and state regulations.
March 27, 2019 at 01:30 PM
3 minute read
Yesterday, Apple Inc. announced it will release a credit card, a new venture into financial services that will require it to comply with a host of new financial regulations.
Apple Card is set to be available in the U.S. starting this summer on iPhone's Apple Wallet app as well as in physical form, and will be backed by established financial institutions Goldman Sachs and Mastercard, according to the company.
"They are now in a regulated industry," said Clark Hill of counsel Thomas Brooks and previous GC of the Federal Deposit Insurance Corporation (FDIC), which insures depositors. "Before Apple was a retailer that offered a lot of services and products and provided a payment mechanism." Now, they must comply with a variety of banking requirements, he said.
Federal laws Apple will likely have to comply with include the Truth in Lending Act, Equal Credit Opportunity Act and Dodd-Frank Wall Street Reform and Consumer Protection Act. Likewise, Apple will be held to various state regulations governing financial transactions. Josh Taylor, an attorney and lead content strategist at Smokeball, said these include usury laws governing the amount of interest charged on a loan, which varies by state.
With its new credit card, Apple has already claimed it will place a high standard on data privacy. Indeed, a physical Apple Card will be shipped to cardholders by request, with no card number, CVV security code, expiration date or signature on the titanium designed card as a way to protect users' data, the company said.
Goldman Sachs will also not share Apple Card users' data to third parties for marketing or advertising, Apple added. While Apple will hold Goldman to a high data privacy standard, Goldman will likely hold the tech company to federal and state financial standards as well.
"Goldman, if they are the funder and bank involved, they have to make sure any relationship they have with Apple is in compliance with all the regulatory issues Goldman has to deal with," Brooks added.
Apple's credit card announcement comes as iPhone purchases are dwindling and Apple looks to other services, including original video content, to improve its sales. Apple joins Amazon.com Inc., which also offers a credit card for purchases in partnership with JPMorgan Chase & Co., as a retailer venturing into financial services.
Social media platforms are also segueing into finance as well. Instagram, a platform known for photo and video posting, now allows a viewer to buy an item pictured on an account entirely through the app. While such transactions brings more compliance requirements, it can help drive traffic on the social media site, lawyers said.
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