CFPB Plans Inquiry into Credit-Card Rates, Rewards, Competition

blog post today from the CFPB examining credit-card interest rates concludes that these are set in ways that provide “outsized profits.”  As a result, the Bureau plans to add this issue to the assault currently under way against late fees (see FSM Report CREDITCARD35) by evaluating whether trends like increasing rewards and high switching costs explain high interest rates and if anti-competitive practices are also at work putting profits above cardholders’ best interests.  The study finds that credit-card pricing appears to be less responsive to macroeconomic trends such as changes in the cost of funds and that mismatches between card interest rates and lending risk may drive undue profitability.