The Consumer Financial Protection Bureau may have sent another canary down the coal mine, this time on the topic of interest and fees charged by credit card issuers.
In a blog post that was published last week, the CFPB noted that consumers pay about $120 billion in credit card interest and fees every year. On average, that works out to about $1,000 per household, according to the Bureau. While that figure may have declined during the pandemic, consumers are once again breaking out the plastic as the economy has improved. And, given the rise in inflation, which means goods and services are getting more expensive, the reliance on credit cards may be increasing.
In its post, the CFPB noted that only eight issuers combine to control about 70% of the credit card market, while also pointing out that the average interest rate on credit cards increased by 20% between 2015 and 2019.
“Given the outsize role that credit card debt plays for many households, the CFPB is looking to ensure that there is robust and fair competition in the credit card market,” the authors of the blog wrote, listing three ways in which the CFPB “will focus on ensuring a more fair, transparent, and competitive credit card market.”
By competitive, the CFPB means that it wants it to be easier for consumers to compare, switch, and refinance their credit cards, including removing barriers that the issuers have put in place to keep consumers from being able to switch. Those barriers include withholding information that had been previously reported to credit bureaus about borrower repayment patterns, which makes it more difficult for other issuers to offer competitively priced products.
“The CFPB is looking to use a long-dormant authority to help spur better credit card shopping and switching by proposing rules that give consumers more control of their financial data,” it wrote. “We are considering options that will help Americans with credit cards escape high rates and lousy service. Consumers who have more control over their own their data may be able to create more options for themselves to find better deals.”
The CFPB also said it will be looking at the “junk” fees assessed by issuers, for balance transfers, cash advances, late fees, and more. Issuers assessed more than $14 billion in late fee penalties alone in 2019, according to the report.