CFPB takes measures against illegal credit card practices, takes action against American Express and Bank of America

Investing.com — The Consumer Financial Protection Bureau (CFPB) announced significant actions today to protect consumers from illegal credit card practices and help them save on interest and fees. The agency warned that some credit card companies running rewards programs might be breaking the law, such as illegally devaluing rewards points and airline miles.

The CFPB also released new research showing that retail credit cards, which often offer store-specific rewards and loyalty programs, charge considerably higher interest rates than traditional cards. Furthermore, the agency introduced a new tool, Explore Credit Cards, to assist consumers in finding the best credit card rates across both rewards cards and traditional cards. This tool allows consumers to compare over 500 credit cards using unbiased, comprehensive data.

“Large credit card issuers too often play a shell game to lure people into high-cost cards, boosting their own profits while denying consumers the rewards they’ve earned,” said CFPB Director Rohit Chopra. “The CFPB is taking aim at bait-and-switch tactics and promoting more competition in credit card markets to protect consumers and give people more choice.”

The CFPB’s actions come during the busy end-of-year shopping and travel season when retail card originations often peak due to high retail sales volumes and promotions during the holidays.

The CFPB has also taken action against issuers such as American Express (NYSE:) and Bank of America for illegal practices related to credit card rewards programs. The agency will continue to monitor these programs and take necessary action on these issues as appropriate.

According to the CFPB’s new research, retail credit cards represent a significant part of the consumer credit card market. One out of every four credit card accounts is a private label retail card, with over 160 million open accounts in 2024. The CFPB found that these retail cards, more than 80 percent of which are issued by four large banks, are more expensive than general-purpose cards.

The CFPB also launched Explore Credit Cards, a tool that helps people make apples-to-apples comparisons about options in the credit card market, using open data. Unlike existing comparison sites that may feature a limited selection of cards with high annual fees and APRs, the CFPB’s new tool provides unbiased, comprehensive data for more than 500 cards, and the data is available to everyone.

The tool addresses a lack of price competition in the credit card market: despite significant rate differences between issuers serving similar customers, people cannot easily compare interest rates before applying. By enabling consumers to explore cards based on credit score range, interest rates, fees, and rewards offerings, the tool also affords consumers with a higher degree of certainty when searching for cards for their situation.

The CFPB is also inviting more companies to contribute to the data set, to make sure that the information can cut through the marketing on pay-to-play platforms.

The CFPB previously used the same comparison data to show that the 25 largest credit card issuers charged interest rates 8 to 10 percentage points higher than smaller banks and credit unions – a difference that can cost the average cardholder $400 to $500 per year. By requiring issuers to report their actual average interest rate by credit tier and making this data public, people have access to information to find the best rates based on their situation and needs.

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