A new report from the Consumer Financial Protection Bureau
(CFPB) points to credit card data indicating that smaller credit card
issuers have “significantly lower” median annual percentage rates than the
largest 25 credit card companies. The report also noted that large institutions
charge higher annual fees than smaller banks.
The report includes data on 643 credit cards (430 of which
were available nationally) from 156 issuers (84 banks and 72 credit unions)
offered between January and June 2023.
The bureau highlighted the following three takeaways in a
press release:
·
“Large issuers offered worse rates across credit
scores: Whether a person has poor, good, or great credit, large issuers
offer higher interest rates. For example, the median interest rate for people
with good credit – a credit score between 620 and 719 – was 28.2 percent for
large issuers and 18.15 percent for small issuers.
·
“Fifteen issuers reported credit cards with interest
rates above 30 percent: 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. Many of these high-cost products were private-label
or co-branded cards offered through retail partnerships.
·
“Large issuers were more likely to charge annual
fees: Among large issuers’ credit cards, 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.”
The report’s findings, which the CFPB plans to update every six
months, elicited mixed responses from the financial sector, as shown below:
Consumer Bankers Association President and CEO Lindsey Johnson:
“The CFPB’s own data simply does not support their assertions about
competition in the credit card marketplace. There are more than 640 individual
credit card products and nearly 4,000 banks today in this highly competitive
marketplace. This may be the only time that anyone has pointed to a market with
vastly different prices as an indication of competition problems.
“While this report focuses on APRs, credit card products
vary significantly in a number of ways: how interest rates are calculated;
whether fees are assessed; new digital and artificial-intelligence-powered
product features; and importantly, the benefits and rewards they offer
consumers. As a result, even within households, the average consumer has
multiple credit cards. Just like any other market, people use different credit
cards for different needs or preferences in their lives. Sometimes a consumer just
wants a drive-thru hamburger. Sometimes a consumer wants a steak. A thriving
marketplace means that consumers can choose products that may have different
prices and offer features, perks, or other value that’s specific to them.”
America’s Credit Unions President and CEO Jim Nussle:
“The CFPB’s new report on the credit card market clearly shows the credit
union difference: Credit unions offer more affordable credit solutions to
Americans than the largest issuers. With better rates and lower annual fees on
average, consumers can more easily achieve their best financial lives when they
partner with a credit union. This report highlights the importance of allowing
credit unions to serve all Americans because big banks clearly aren’t. We will
continue to fight for field of membership reforms and other policy improvements
to ensure consumers’ access to credit unions and their superior offerings.”
Independent Community Bankers of America (ICBA): On
the group’s website, ICBA pointed out portions of the report noting the
difference in purchase APR between the largest credit issuers and smaller
issuers. The difference, the report states, translated to average annual
savings of $400 to $500 for customers of smaller banks with an average balance
of $5,000.