In a new data spotlight issued last week, the Consumer Financial Protection Bureau (“CFPB”) found that interest rates charged on credit cards issued by large banks are higher than interest rates charged on credit cards issued by smaller banks and credit unions. In a press release about the report, CFPB Director Rohit Chopra states that “the CFPB will be accelerating its efforts to ensure that consumers can access better rates that can save families billions of dollars per year.”

The CFPB has already targeted credit card late fees in a proposed rule that we expect to be finalized prior to President Biden’s State of the Union address on March 7th and as soon as this week. The proposed credit card late fee rule seeks to reduce the safe harbor dollar amount for credit card late fees to the lesser of $8 or 25% of the minimum payment.

In the new data spotlight, the CFPB discusses its analysis of data that it collected on credit card terms on 643 credit card products from 156 issuers (84 banks and 72 credit unions) offered from January through June 2023. The CFPB found:

Small banks and credit unions offered lower APRs than the largest 25 issuers across all credit score tiers, resulting in an average savings of $400 to $500 a year for a consumer with an average balance of $5,000 using a small bank or credit union’s card.

A lack of competition likely contributes to higher rates at the largest credit card issuers. The top 30 credit card issuers represent about 95% of credit card debt, and the top 10 issuers dominate the marketplace.

Fifteen issuers, including nine of the largest credit card issuers, offered credit card products with a maximum purchase APR over 30% with many products offered through a retail partnership. (The CFPB shares of list of these issuers.)

Large issuers more often include an annual fee than the small institutions with the average size of annual fees approximately 70% higher than annual fees at small institutions.

The report concluded with the statement that “[t]he CFPB is working on a number of fronts to jumpstart competition in the credit card market, including the development of rules to promote consumers’ freedom to switch providers, addressing loopholes that obscure upfront pricing, taking enforcement actions against illegal rewards conduct, and scrutinizing comparison websites for deceptive design and business practices.”

In a press release responding to the CFPB’s report, the Consumer Bankers Association (CBA) raised concerns about what it called the “troubling, unfounded statements” made by the CFPB about the highly competitive credit card market. CBA’s President and CEO stated, “Rather than bolstering this already highly competitive and well-regulated market, the CFPB seems to be driving consumers to a one-sized-fits-all world, focused on specific criteria that the CFPB chooses, as opposed to the preferences of the people we should all be working to serve.”

In October 2023, the CFPB issued its Biennial CARD Act Report to Congress. The CFPB highlighted potential areas of concern related to credit card usage, market share, competition, profitability, cost of credit, credit availability, rewards and stated “the CFPB will continue to monitor assessments of late fees, reliance upon penalty repricing, and debt collection practices, alongside the disclosure of minimum payments in accordance with CARD Act requirements.” CBA launched a four-part blog series to counter the CFPB’s misinformation in the biennial report.

The new report appears to expand the CFPB’s focus to interest rates and credit card pricing. In its press release, the CFPB states that it is developing a new tool that will give consumers “an unbiased way to compare credit card terms and interest rates” and it will issue another credit card report from the CFPB in the late spring 2024.