The New York Department of Financial Services is launching an investigation into Goldman Sachs' credit card practices after a tech entrepreneur accused the bank's Apple Credit Card algorithm of discriminating against women when determining credit card limits.
David Heinemeier Hansson condemned Apple Card for providing him a credit limit that is 20 times higher than his wife, even though the couple files joint tax returns and his wife has a higher credit score.
Even when Hansson's wife paid off her low credit limit in full, the card wouldn't approve her spending until the next billing period, he wrote in a series of tweets starting on Thursday. He didn't disclose their respective income information.
"DFS is troubled to learn of potential discriminatory treatment in regards to credit limit decisions reportedly made by an algorithm of Apple Card, issued by Goldman Sachs," said a spokesman for Linda Lacewell, the agency's superintendent.
"The Department will be conducting an investigation to determine whether New York law was violated and ensure all consumers are treated equally regardless of sex."
The tweet thread immediately gained traction online and received a comment from Apple co-founder Steve Wozniak, who alleged that Apple Card gave him 10 times the credit limit that his wife got.
"We have no separate bank or credit card accounts or any separate assets," Wozniak tweeted. "Hard to get to a human for a correction though. It's big tech in 2019."
Goldman Sachs did not respond to a request for comment.
Hansson, creator of the programming tool Ruby on Rails, said that after his complaints Goldman bumped up his wife's credit limit without requesting any additional documentation or addressing the root of the issue. Goldman's customer service representatives could not explain what happened, but repeatedly explained that "It's just the algorithm," according to Hansson.
"It does not matter what the intent of individual Apple reps are, it matters what THE ALGORITHM they've placed their complete faith in does," Hansson wrote. "And what it does is discriminate."
Congress has scrutinized the use of algorithms by lenders in credit decisions. The House Financial Services Committee in June held hearings on instances of bias against certain groups within algorithms, even when there was no intent to discriminate.
In most cases, the issue could stem from the fact that the Apple Card is only for individual accounts, not joint accounts, according to a person with knowledge of the issue. If Hansson's wife is judged on her own income and is part of a high-earning and spending household, then her credit utilization could potentially look high relative to her own income, thus resulting in a low credit limit, the person said.
Hansson said he hopes that his situation will raise awareness of biases within black-box algorithms.
— CNBC's Hugh Son contributed reporting