The CFPB reviewed the credit card market and reported some positive and negative findings.

The Consumer Financial Protection Bureau (CFPB) recently released a report analyzing the credit card market. The report discusses both positive and negative findings and was conducted as required by the Credit Card Accountability Responsibility and Disclosure Act of 2009 (CARD Act).

More on the CARD Act

The CARD Act was passed in response to the 2008 financial crisis in an attempt to protect consumers from an overzealous credit market. It used regulations to curb the ability of credit card companies to raise interest rates and fees. The law included a provision requiring a biennial review of the credit card market by the CFPB.

More on the report

The most recent report, released in December of 2015, is the second report since the CARD Act was passed. The first was released in 2013 and found that the CARD Act had “increased transparency in the consumer credit card market” by capping fees and eliminating certain reprising practices.

The main findings from the most recent report include both positive and negative points. The positive is that the “all-in cost of using credit cards” has remained stable since the last report. Unfortunately, three concerns for consumers remain:

  • Deferred interest. These programs generally offer consumers the opportunity to purchase a larger item, like furniture, free of interest for a period of time. After this time passes, the agreed upon interest is applied. The report finds that the lack of transparency in this market results in “avoidable consumer costs.”
  • Special credit cards for subprime situations. Credit card offers that target consumers with subprime scores have significantly higher costs compared to their mass market counterparts. These higher costs were reflected in fees and interest rates that resulted in consumers owing 40 percent more than their year-end balances in 2013 and 2014.
  • Variable interest rates. These are rates that are scheduled to rise when background interest rates in the economy rise. Most cards now carry these rates. Although the report notes that these rates themselves are not concerning, the fact that they will likely increase in the near future is. There is concern that not all consumers will be aware of this potential increase as well as the fact that the rate applies to both future and existing balances.

These negatives could result in greater debt for consumers in the future.

Options for those struggling with credit card debt

Depending on the details of your situation, those facing unmanageable credit card debts may be eligible for relief through bankruptcy. Credit card debt is often dischargeable, meaning if the application is approved the applicant may no longer be liable for the debt.

There are benefits and risks with filing for bankruptcy. As a result, it is wise for those considering a fresh financial start through a petition for bankruptcy to contact an experienced lawyer. This legal professional will review your situation and discuss the options that can help you meet your future financial goals.


-On behalf of David Nickless