Report Reveals Americans Pay $120 Billion a Year in Credit Card Interest and Fees

Advocate Andy

Consumer Bureau Outlines Possible Consumer Protection Actions

The Consumer Financial Protection Bureau (CFPB) has issued a report noting that Americans spend $120 billion per year on credit card interest and fees.

In a blog post highlighting key findings, the bureau notes:

At almost a trillion dollars outstanding, credit cards are the largest consumer lending product by number of users — over 175 million consumers have at least one credit card — and one of the largest sources of consumer debt

While the pandemic caused many consumers to cut back on spending, the CFPB reports that consumer spending (and debt) is on the rise again. Due in part to consolidation in the credit card market, credit card interest rates are relatively high compared to other types of debt.

As the bureau notes:

“…from 2015 to 2019, the average assessed interest rate on credit cards increased by more than 20% (from 13.7% to 16.9%).

Proposed Action

As a result of the significant role that credit card debt plays in the American economy, the CFPB has indicated it will be examining ways to take action to protect consumers. Specifically, the CFPB notes it will work to:

Uncover unfair, anticompetitive practices. When an industry has a small number of major players, it can be common to see parallel, anticompetitive shifts in business practices. For example, in 2020, the CFPB uncovered that, over the course of 2014, major players in the credit card industry started withholding information that they previously reported to the credit bureaus about borrower repayment patterns and still do to this day.
Make it simpler to compare, switch, or refinance your credit card. Americans who want to shop for the lowest rate credit card don’t always have great ways to do so. Many credit card products advertise broad interest rate ranges. To get a specific rate, consumers often must apply for those cards, which results in a hard credit check, which perversely can lower a consumer’s credit score.
Scrutinize junk fees. While many of the worst practices that plagued the credit card industry were banned in the CARD Act of 2009, the industry is still heavily dependent on fees. For example, the CFPB estimates that credit card companies assessed $14 billion in late fee penalties alone in 2019, which fall disproportionately on Americans with lower credit scores.

These steps are designed to create a more competitive marketplace for consumer borrowers. While the CFPB notes that credit card companies are not always reporting the most accurate information, another report indicates that credit reporting bureaus are slow to make corrections. These two issues can combine to reduce access to credit, especially for the most cash-strapped consumers.

Consumer Group Applauds CFPB for Report on Failures of Credit Bureaus | by Andy Spears | Jan, 2022 | Medium

In fact, the Public Interest Research Group (PIRG) has called the Big 3 credit bureaus a failure.

For over 30 years now, PIRGs have fought for changes in the private credit reporting system that the Big 3 bureaus dominate. A summary of our own findings is this: The big 3 credit bureaus function as self-appointed gatekeepers to financial and employment opportunity. Their oligopoly has been an epic fail for consumers.

Meanwhile, CFPB director Rohit Chopra issued some harsh criticism of the industry:

“America’s credit reporting oligopoly has little incentive to treat consumers fairly when their credit reports have errors,” said CFPB Director Rohit Chopra. “Today’s report is further evidence of the serious harms stemming from their faulty financial surveillance business model.”

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Andy Spears is a middle Tennessee writer and policy advocate. He reports on news around public policy issues - education, health care, consumer protection, and more.

Nashville, TN

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