CFPB Signals Increased Scrutiny of Credit Card Industry Interest Rates

In a recent blog post, the CFPB reported on research into various factors considered significant in explaining current credit card interest rates.  The CFPB reported that over 175 million Americans have at least one credit card, half of which carry a balance that continues to accrue increasingly high interest rates.  In an era that has seen the Federal Reserve Bank aggressively raise interest rates to combat inflation, Americans’ increasing reliance upon credit cards to cover every day expenses has sparked renewed interest in the practices of the credit card industry with respect to interest rates and fees charged.

The research collected in the blog post shows credit card interest rates increased following the Great Recession despite a number of industry indicators suggesting the risk of credit card lending has fallen to an all-time low.  The factors presented include (1) record low charge-off rates (the measure of accounts deemed uncollectable after sustained delinquency); (2) a stagnant percentage of subprime cardholders; and (3) historically low prime rates.