When shopping online or in store, people like to weigh the costs and benefits of different products before they make a purchase, but it can be a challenge for consumers to compare interest rates across credit cards. Often, this price is hidden behind other promotional terms such as introductory rates, cash back rewards, or sign-up bonuses.
The lack of transparency in credit card terms and conditions is not new. In 1988, Congress passed the Fair Credit and Charge Card Disclosure Act to provide for a more detailed and uniform disclosure of credit card rates and fees by issuers. The Act originally required the Board of Governors of the Federal Reserve to collect credit card price and availability data from a sample of credit card issuers and make them available to the public; starting in 2011, this responsibility transferred to the CFPB. Twice per year, at least 150 issuers submit information to the CFPB on their largest credit card plans, including interest rates and fees, through our Terms of Credit Card Plans (TCCP) Survey.
The way this data is currently collected and published can be updated to help make it easier for people to shop for credit cards. For example, card issuers do not have to disclose realistic rates based on someone’s creditworthiness and instead report the midpoints of broad ranges that are often meaningless to people trying to compare cards.
To spur competition and give Americans the power to shop around and choose the best credit card for their needs, the CFPB is considering modernizing the TCCP Survey by:
Collecting median rates by credit score tiers
Issuers frequently disclose the purchase Annual Percentage Rate (APR) to shoppers as a range based on creditworthiness. Yet, consumers do not usually know where they fall within an issuer’s range of APRs until after applying and being approved for a credit card. Because applying for a credit card requires a hard credit inquiry—which may negatively impact one’s credit scores—some people may be hesitant to apply for multiple credit cards. This structural barrier may discourage consumers from searching widely for the best rate.
To provide people with a better understanding of the price of different credit cards, we are considering requiring selected issuers to submit data on the median APR offered to consumers in three broad credit score tiers. People often have a general idea of their credit scores, so seeing the median APR for their range will allow them to better compare realistic APRs across products and estimate the potential cost of borrowing before they apply.
Gathering information on credit cards available to specific communities or groups
Many smaller institutions like regional banks and credit unions only offer credit cards to people in particular communities or with specific affiliations. These institutions may offer better rates than the top issuers, but often do not advertise as widely as the biggest players.
By collecting and disclosing information on requirements for opening these types of accounts, we could help consumers see if they’re eligible for certain products and offer a free platform for local organizations focused on relationship banking to find customers.
Requiring the biggest issuers to submit information about more credit cards
One of the biggest changes we are considering to the TCCP Survey would require the top 25 issuers to submit data on each of their general purpose credit cards. Currently, these issuers only submit information on their product with the largest number of accounts. The top issuers represent the vast majority of the credit card market, and many of them offer dozens of products. Each of these credit cards typically offers a different combination of rates, fees, and rewards.
We want to help people make choices on which credit cards fits their unique needs, rather than only major issuers’ largest cards. Other institutions selected for the sample would continue to be required to report on one product but could submit more information if they wish.
Enabling institutions to volunteer to participate
We are considering allowing a broader range of institutions to volunteer to become part of the TCCP Survey sample, so that more companies can present information on their credit card offerings and compete with other issuers.
This comment request is the first step in our plan to update the TCCP Survey to become a more useful resource on credit card price and availability for consumers. Public input on other ways we can improve the TCCP Survey or reduce its burden on issuers will help shape our next steps.