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As outstanding credit card debt hits new high, the CFPB is focusing on ways to increase competition and reduce costs

Credit cards are one of the most common financial products in our country, providing the bulk of short-term credit for families. Interest rates on credit cards have risen substantially, with average interest rates going over 20% . Given the trends for the 175 million Americans with credit cards, the CFPB estimates that outstanding credit card debt may continue to set records and could even hit $1 trillion.

As credit card issuers hike rates, the CFPB is working across the board to make sure that Americans can shop in a competitive market and reduce their costs.

We’ve proposed reforms to credit card penalty fees. In a competitive market, credit card companies will compete upfront on the interest rates they charge, rather than building a business model on back-end fees. In February, we announced a proposal to amend a rule provision put into place by the Federal Reserve Board of Governors in 2010 that credit card issuers have used to sidestep a Congressional prohibition on unreasonable or out of proportion penalty fees.

This loophole has allowed some credit card issuers to charge big fees even when a borrower is just a day late. The proposal would permit credit card issuers to charge a penalty of $8 or an amount that is in line with their costs.

We have extended the comment period on the proposed credit card late fees rule to give the public 90 days to provide feedback. It’s easy to submit a comment. Weigh in by May 3, 2023 .

We’re making it easier for small credit card issuers to challenge bigger players. Last month, we announced updates to a CFPB credit card database, which is powered by a survey of credit issuers that reveals terms and pricing.

The upgrades to the survey and database are intended to create a neutral data source that can facilitate comparison shopping, which will be especially useful for those looking to refinance their credit card debt and for small players in the market who offer lower rates. The neutral data source will also help to power comparison shopping on third-party websites, rather than relying on “pay-to-play” marketing arrangements.

The revamped survey will mean that dominant credit card issuers will be more transparent by requiring them to publish average interest rates based on credit score ranges. Small banks and credit unions will also now have a chance to have their prices displayed next to those of the largest ones. More neutral information will lead to increased competition and lower market prices. This is especially important in the current high-rate environment.

These aren’t the only initiatives. We’re conducting a broader review of credit card industry practices and thousands of people have submitted input. We’ll be accepting public feedback until April 24, 2023 . We continue to review credit reporting practices, including the suppression of key data from consumer credit reports by large credit card issuers. We’re also getting ready to propose a rule this year on personal financial data rights. This will help accelerate the shift in the U.S. toward open banking and allow easier switching away from products with high rates and poor service to products that can save borrowers money and frustration.

We’ll continue to keep you updated on our work to reduce costs for families with credit card debt.

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