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Financial Services Law Insights and Observations

CFPB report reveals high credit card costs, growing debt, and digital shifts led to consumers’ revolving debts in 2022

Federal Issues CFPB Credit Cards Consumer Finance Fees Interest

Federal Issues

On October 25, the CFPB released a report on credit card interest rates and fees in 2022 highlighting the impact of the cost to consumers. The report found that credit card companies charged consumers more than $105 billion in interest and $25 billion in fees, with the bulk of the fees being late fees.

According to the 175-page report, consumers are rolling balances month-to-month, falling into debt, while credit card companies’ profit margins remain high. The CFPB highlighted additional trends, including how (i) the profits of major credit card companies have increased, surpassing pre-pandemic levels, which could indicate a lack of competition in the industry, with a few dominant players; (ii) Annual Percentage Rates (APRs) for credit cards continue to rise above the cost of offering credit (meaning cardholders are paying more in interest); (iii) many cardholders with subprime credit scores paid a significant percentage of their average balance in interest and fees; (iv) late fees charged to cardholders have risen to pre-pandemic levels, and more consumers are delinquent; (v) credit card debt reached a record $1 trillion by the end of 2022, and annual spending on credit cards increased, returning to pre-pandemic levels; and (vi) consumers who roll debt from month to month are paying a significant portion of interest and fees but earning only a small percentage of rewards. The report also notes a rise in digital communication—around 80 percent of cardholders, especially those under 65, use mobile apps for card management, which exhibits a shift in how consumers and financial institutions interact in the credit card industry.