CFPB Reports CUs ‘Substantially’ Have Lower Card Rates Than Big Banks

In a scathing and detailed report on the big banking industry’s business practices, the CFPB released a report Friday that found the large banks charge much higher interest rates on credit cards than credit unions or smaller banks.

Not only did the report call out the higher interest rates charged by the biggest of banks, the CFPB also “found high levels of concentration and evidence of practices that imply anti-competitive behavior in the consumer credit card market.”

In its newly-updated “Terms of Credit Card Plans” survey, the CFPB found “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 difference can translate to $400 to $500 in additional annual interest for the average cardholder.”

CFPB Director Rohit Chopra said, “Our analysis found that the largest credit card companies are charging substantially higher interest rates than smaller banks and credit unions. 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.”

In its findings, the CFPB said the following card issuers had an APR of more than 30%:

• 1st Financial Bank
• Ally Bank
• Banco Popular de Puerto Rico
• Capital One
• Citibank
• Comenity Capital Bank (Bread Financial)
• Commerce Bank
• First National Bank of Omaha
• First Premier Bank
• FirstBank Puerto Rico
• Merrick Bank
• Synchrony Financial
• TD Bank
• The Bank of Missouri
• USAA Federal Savings Bank

According to the CFPB, the survey data included information on all general-purpose credit cards of the largest 25 credit card issuers in the United States. The data also include a representative sample of products from small- and medium-sized banks and credit unions across the country.

The main findings of the survey included:

• 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 28.20% for large issuers and 18.15% for small issuers.
• Fifteen issuers reported credit cards with interest rates above 30%: 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%. 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% carried an annual fee, compared to just 9.5% of small firms. The average annual fee was $157 for the largest issuers, as opposed to $94 for smaller issuers.

In response to the CFPB’s findings, President/CEO of America’s Credit Unions Jim Nussle said, “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.”

CFPB officials said they will continue to release data on credit card pricing and availability every six months. The next release is scheduled for later in the spring 2024.

READ MORE: “Credit card data: Small issuers offer lower rates”