Goldman’s appeal to the masses: Let us manage your debt

America’s middle class has a growing financial problem that Goldman Sachs (GS) wants to help solve: credit card debt. 

The investment bank quietly rolled out a new service called Marcus by Goldman Sachs late last year by issuing private invitations for the personal loan service. After what Harit Talwar, head of the Marcus project, said was a successful debut, the program is now open to a larger pool of consumers. 

The average American household has more than $16,000 in credit card debt, according to NerdWallet. Still, the potential customer base, while not small, is a marked departure from Goldman’s usual client profile of ultrarich titans of industry and large corporations. 

Marcus is aimed at Americans who may appear ordinary yet have one quality that sets them apart: excellent credit scores. About one-third of people with good or excellent credit scores are carrying debt, the company said, and many of those consumers are unsure of how to dig their way out from the problem. 

“We heard from a school teacher who said the washing machine broke down. You put it on your credit card, thinking you’ll pay it back,” Talwar said in an interview. “These life moments happen, and suddenly there are millions of customers who realize they have $5,000 to $20,000 in credit card debt.”

He added, “This didn’t happen because they went to Vegas. It could have been a car transmission, braces for a child. People build credit card debt and continue to service that debt. They aren’t defaulting, but they feel under pressure.”

Marcus is geared toward helping customers pay off that debt by providing personal loans with interest rates Goldman says are generally several percentage points lower than what credit cards charge. Customers can customize their monthly payments to pick a repayment amount that will work with their budget. The loan amounts range from $3,500 to $30,000 and can be repaid over two to six years. 

While that may seem plain vanilla, Talwar said the service’s secret sauce is in its commitment to avoid fees. 

“We’re saying no fees ever -- no prepayment fee, and no late fee if you go late,” he said. “If you go late, they will pay interest for a longer period of days, although for that same fixed rate.”

The service also provides an incentive for consumers who pay in full and on time for 12 consecutive months. At that point, customers can defer one payment, which Talwar said was “a very unique feature” in the personal loan industry. “Instead of a stick, we have a carrot,” he said. 

That approach may surprise some, given that Goldman’s brand typically doesn’t generate warm and fuzzy feelings. After all, the 147-year-old investment bank has been described as “a great vampire squid” and “the evil empire.” 

However, the new service’s brand provides an insight into how Goldman is hoping to capitalize on its reputation for financial management, while layering on a more approachable veneer. 

Marcus bears the name of Marcus Goldman, a German banker who immigrated to the U.S. and became the co-founder of Goldman Sachs. Yet Talwar said the company’s research found that adding the Goldman Sachs name behind “Marcus” helped convey security and longevity. 

“Our research shows [the brand] conveys the newness and freshness of the offering,” he said. “As we say, it’s a 147-year-old startup.”

While he declined to comment on Marcus’ revenue or profits, Talwar said the early response suggests “people are favorably reacting to the brand.”

As far as timing, Marcus is expanding just when Americans are coming to terms with their holiday debt. Debt carries a stigma so deep that Goldman survey found that almost one out of four Americans would feel more relief from paying off their debt than losing weight. 

“We are talking about people with good credit, and you would assume they would know how to manage that debt,” said Dustin Cohn, head of marketing for Marcus. “It was startling to us.”