CFPB Scrutinizing Credit Card Industry Interest and Fees
The Consumer Financial Protection Bureau (CFPB) last month took aim at credit card issuers and announced that it was looking at whether credit card companies are participating in unfair or anti-competitive practices, particularly as just eight companies control 70 percent of the market. The Bureau is also looking at ways to make it easier for consumers to compare, refinance, or switch credit cards.
“The market is dominated by a handful of banks and credit card giants,” tweeted CFPB Director Rohit Chopra after a blog post was published. In the post, the Bureau highlighted that consumers paid roughly $120 billion per year in credit card interest and fees from 2018 to 2020, or about $1,000 per household each year.
The CFPB stated that credit cards have interest rates that are much higher for consumers than other forms of credit. From 2015 to 2019, the average assessed interest rate for credit cards rose by more than 20 percent, from 13.7 percent in 2015 to 16.9 percent in 2019. That’s why the Bureau is now focused on increasing competition to help consumers refinance credit card debt.
“Many credit card customers are often locked into high rates with few options to easily escape,” the CFPB’s blog post reads. “If there were more intense competition to refinance balances, consumers could save billions.”
Additionally, the Bureau noted that it will pay close attention to industry-wide practices that challenge fair competition after finding that information regarding borrower repayment patterns had not been reported to credit bureaus by some companies since 2014, which ultimately made it more difficult for other companies to offer competitive pricing.
With its authority under Section 1033 of the Dodd-Frank Act, the CFPB is planning to require companies to allow consumers to download their bank data, stating that “consumers who have more control over their own data may be able to create more options for themselves to find better deals.”