The Consumer Bankers Association has issued the third and fourth blog posts in its four-part “Facts Matter” blog series on how the CFPB’s public statements can mislead market observers by painting a picture of the credit card marketplace that is inconsistent with the CFPB’s October 2023 report (Report) under the Credit Card Accountability Responsibility and Disclosure Act.
Third blog post. In the third blog post, CBA focuses on how the CFPB’s press release accompanying the Report “gives the impression that consumers are increasingly falling behind on their credit card payments” when, in actuality, the Report data tells a very different story. Specifically, according to CBA, the Report shows:
- More consumers are paying off their credit card balances each month than in prior years.
- Consumers carrying credit card balances are paying down higher shares of their balances than in recent years, reducing their debt burdens and increasing their credit scores.
- The percentage of consumers that meet the CFPB’s definition of “persistent debt” is lower than each and every pre-pandemic year. The CFPB uses the term “persistent debt” to mean paying more in interest and fees than what is paid toward principal each year.
CBA observes that “[c]ard issuers are at least partially responsible for these increased paydown rates because card issuers have managed to raise minimum payment floors (requiring that consumers pay more into their credit card debt each month), without reducing credit access or raising late fees on consumers that are on the margin.”
Fourth blog post. In the fourth blog post, CBA focuses on the following secondary headline from the CFPB’s press release about the Report: “Consumers with revolving debts on average pay far more in interest and fees than get back in rewards.”
CBA observes that “[i]t’s difficult to understand why the CFPB believes it is newsworthy to clarify that it costs money to borrow. Simply put, it costs money to borrow money.”
CBA addresses this headline by commenting that while the CFPB is not a safety and soundness regulator, as the nation’s primary regulator of consumer financial products and services, the CFPB must understand that the safety and soundness of every financial institution (and ultimately the financial stability of the nation as a whole) would be jeopardized if consumers could net positive by borrowing money.
CBA then identifies the following issues about which the CFPB’s approach raises questions:
- How the CFPB views banks, as businesses;
- The seriousness with which the CFPB appreciates the complexity of risk management within individual institutions and across the financial system; and
- The extent to which the CFPB’s public statements are vetted by its experts, lawyers, or otherwise reviewed.