Recently, the Consumer Financial Protection Bureau (CFPB or Bureau) issued its first report on the results of its updated Terms of Credit Card Plans survey. The report found that for the first half of 2023, small banks and credit unions often offered lower interest rates than the largest 25 credit card companies across all credit score tiers. The CFPB’s survey included data on 643 credit cards from 156 issuers (84 banks and 72 credit unions), as offered during the first half of 2023.

The report further found:

  • The 25 largest credit card issuers charged customers interest rates of eight to ten percentage points higher than those charged by small- and medium-sized banks and credit unions, for cardholders in the “poor”, “good”, or “great” credit bands set by the CFPB.
  • The difference in reported annual percentage rate (APR) for purchases between the largest and small card issuers translated to 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.
  • Fifteen issuers (including nine of the largest credit card issuers) reported offering at least one credit card product with a maximum purchase APR over 30% — many of which were co-branded cards associated with a retail/bank partnership. Such issuers are listed in the report.
  • Products offered by large issuers were almost three times as likely to include an annual fee than those at small institutions.

Notably, the CFPB conceded that small issuers include federal credit unions, which have a statutory interest rate cap of 18%, but still maintained that even excluding the credit union programs, small issuers are still charging lower APRs than the larger card issuer banks.

At the conclusion of its report, the Bureau posited that factors such as high market concentration levels and other noted impliedly anti-competitive behavior in the credit card market may be limiting price competition and supporting the ability to charge higher rates to consumers. “As we noted in 2023, the top 30 credit card companies represent about 95 percent of credit card debt, and the top 10 dominate the marketplace.” The CFPB vowed to “jumpstart competition in the credit card market,” by developing rules to promote open banking, addressing loopholes that allow credit card issuers to extract “junk” fees, taking enforcement actions against companies withholding credit card rewards or engaging in other illegal conduct in this area, and scrutinizing comparison websites for deceptive design and business practices that may promote more expensive products over cheaper alternatives.

Further, in the press release announcing the report and in the report itself, the CFPB stated that it will continue to issue reports on credit card pricing and availability every six months. The CFPB is also developing a consumer-facing tool aimed at giving people looking for a new credit card an “unbiased” way to compare credit card terms and interest rates.

Our Take:

This “data spotlight” is largely reporting on the findings of the CFPB survey — there is not a lot in the way of analysis into the causes of the seeming disparities being highlighted, other than a somewhat conclusory paragraph concerning how high market concentration and other listed practices may be limiting price competition, contributing to higher rates at the large credit card issuers and potentially causing harm to cardholders. What is likely is that the CFPB will seek to utilize these findings to support its efforts to “jumpstart competition” in this market.