In its biennial report to
Congress, the Consumer Financial Protection Bureau (CFPB) highlighted data
indicating outstanding credit card debt in 2022 surpassed $1 trillion for the first
time since the bureau began tracking this data.
Credit card companies collected
more than $130 billion – $105 billion in interest and $25 billion in fees –
from consumers in 2022, the report states.
The report raises concerns
about the increase in consumers carrying balances from month to month,
spiraling into deeper debt, while credit card company profits remained
substantially higher than pre-pandemic levels.
“Last year, Americans paid $130
billion in interest and fees on their credit cards,” CFPB Director Rohit Chopra
said in a release. “With credit card debt crossing the trillion-dollar mark, we
will be working to prevent bait-and-switch tactics when it comes to rewards and
to increase refinancing activity so consumers can get lower rates.”
Under the Credit Card
Accountability Responsibility and Disclosure Act, the CFPB periodically reviews
developments in the credit card market. The bureau identified the following
recent trends in consumer credit card activity, including:
·
Major credit card companies' profits are higher
than pre-pandemic levels, indicating limited competition in the top 10 credit
card companies.
·
Average annual return on assets for general
purpose cards reached 5.9 percent in 2022, compared with 4.5 percent in 2019
and a peak of 9.6 percent in 2021.
·
Credit card companies set interest rates well
above major indexes, with an average APR margin of 15.4 percentage points above
the prime rate in 2022.
·
Cardholders were charged a record $130 billion
in interest and fees in 2022.
·
Late fees amounted to $14.5 billion, returning
to pre-pandemic levels and up from $11.3 billion in 2021.
·
Credit card debt surpassed $1 trillion for the
first time at the end of 2022.
·
More cardholders are struggling with persistent
debt, with a higher percentage of balances going over 180 days delinquent.
·
Consumers with revolving balances paid more in
interest and fees than they earned in rewards.
The CFPB report also highlighted
the continuing shift toward the use of digital communication in the credit card
marketplace, noting consumers are more frequently using digital portals, such
as website and mobile apps, to manage credit cards and make payments.
Nearly 80 percent of cardholders
are enrolled in their card’s mobile app, with adoption rates even higher for
consumers under the age of 65, according to the report. The bureau also found
credit card companies and debt collectors are becoming more reliant on text
messages and emails to contact borrowers about past-due balances, while
continuing to utilize more traditional communication avenues, such as phone
calls or postal mail.