CFPB releases survey on credit terms and interest rates among banks

A recent survey by the Consumer Financial Protection Bureau (CFPB) found that large banks are offering worse credit card terms and interest rates than small banks and credit unions, regardless of credit risk.

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The first set of results from the CFPB’s newly updated Terms of Credit Card Plans survey revealed that the 25 largest credit card issuers charged customers interest rates of 8 to 10 points higher than small- and medium-sized banks and credit unions. This translates to $400 to $500 in additional annual interest for the average cardholder, the CFPB said.

“Our analysis found that the largest credit card companies are charging substantially higher interest rates than smaller banks and credit unions,” CFPB Director Rohit Chopra said. “With over $1 trillion in credit card debt outstanding, the CFPB will be accelerating its efforts to ensure that consumers can access better rates that can save families billions of dollars per year.”

Among the survey’s key findings, it found that large issuers offered worse rates across credit scores. For example, the median interest rate for people with good credit – a credit score between 620 and 719 – was 28.20 percent for large issuers and 18.15% for small issuers. Also, 15 issuers reported credit cards with interest rates above 30 percent while nine of the largest credit card issuers in the country reported at least one product with a maximum purchase annual percentage rate (APR) over 30 percent. CFPN noted that many of these high-cost products were private label or co-branded cards offered through retail partnerships.

The survey also found that large issuers were more likely to charge annual fees. Specifically, among large issuers, 27 percent carried an annual fee, compared to just 9.5 percent of small firms. The average annual fee was $157 for the largest issuers, as opposed to $94 for smaller issuers.

Last October, the CFPB published its biannual consumer credit card market report. The report noted that more than 190 million consumers have at least one credit card. The report also stated that both credit card debt and spending reached record levels at the end of 2022. Debt surpassed $1 trillion, and spending reached $846 billion.

The next release in this series is slated for later in spring 2024. Further, the CFPB is developing a consumer-facing tool that, once finished, will give people looking for a new credit card an unbiased way to compare credit card terms and interest rates.