RSSThe Consumer Financial Protection Bureau wants to take a closer look at credit card fees, according to a blog post on the agency’s website.
The bureau said it wants to do three things through the examination: Uncover unfair, anticompetitive practices; make it simpler to compare, switch, or refinance credit cards; and scrutinize junk fees. The CFPB cited a “long-dormant authority” — derived from Section 1033 of the Dodd-Frank Act, which governs consumer access to financial records — “to help spur better credit card shopping and switching by proposing rules that give consumers more control of their financial data.”
From 2018 to 2020, the CFPB estimates that Americans paid roughly $120 billion per year in credit card interest and fees, about $1,000 per year per household, the agency said. “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,” wrote Ashwin Vasan and Wei Zhang, the authors of the blog post. The pair also pointed out the relatively consolidated nature of the market, with eight companies controlling 70 percent of total balances.
“Credit cards play an integral role in the finances of most Americans,” they said. “The CFPB will keep the public updated on changes to the credit card market and actions we are taking to ensure it is working effectively on behalf of American households.”
The American Bankers Association emphasized the utility of credit cards for consumers, emphasizing the decrease in interest and fees paid by consumers in 2020 ($117 billion, down from $128 billion in 2019 and $119 billion in 2018).
“We firmly believe … that the vast majority of credit card users in this country, including the millions of Americans who received relief from their issuers during the pandemic as noted by the CFPB in its 2021 Consumer Credit Card Market Report, value and appreciate their credit cards and the customer service that comes with them,” an unnamed ABA spokesperson said in a blog post. “As the CFPB blog post points out, over 175 million consumers have at least one credit card. Each and every one of those consumers chose to open a credit card account because of the safety, convenience and significant benefits that come with today’s credit cards.”
While credit card debt decreased during the pandemic, it has begun to climb again, increasing in both the second and third quarters of 2021, according to data from the Federal Reserve Bank of New York. “The irregularities in credit card accounts and use were fleeting outcomes reflecting the intense early months of the pandemic recession and the most recent data suggest a return to normal trends, albeit from lower levels,” New York Fed researchers wrote in a blog post.
