Last year, it was reported that Americans paid over $120 billion annually in interest and fees on credit cards. Since then, average interest rates charged by credit card companies have risen rapidly. It is crucial for consumers to be able to identify and switch to credit cards with the lowest and most competitive rates. Therefore, we have been closely examining obstacles to a fair and competitive credit card market, especially concerning the role of consumer credit reporting.
In 2020, the Consumer Financial Protection Bureau (CFPB) observed that the largest credit card companies began intentionally withholding their customers’ actual payment amounts from the nationwide consumer reporting system. Actual payments refer to the amount a borrower repays each month, as opposed to the minimum payment or balance. The failure of credit card companies to report actual payment data means that millions of individuals’ credit reports lack essential information about their credit card repayment behavior, potentially preventing them from receiving better financial offers and potentially saving billions of dollars in interest expenses.
Credit and retail cards constitute the majority of accounts, or “tradelines,” listed in credit reports, amounting to nearly 70 percent of all tradelines shared into the nationwide consumer reporting system. When the largest credit card companies suppress any part of a consumer’s credit history, it can have adverse effects on consumers and the credit market overall.
Last May, letters were sent to the CEOs of the nation’s largest credit card companies, including JPMorgan Chase, Citibank, Bank of America, Capital One, Discover, and American Express, inquiring if they ever provided actual payment information. For those suppressing actual payment information, they were asked why they ceased sending complete data and if they had plans to change this practice. Here are some key findings:
Major market players swiftly implemented the change to suppress data. While no investigation into explicit collusion was conducted, responses indicated that one large credit card company initiated the change, and other players followed suit shortly afterward. Following this change, the proportion of furnished credit card accounts with actual payment information dropped by over half, from 88 percent in late 2013 to only 40 percent by 2015.
Credit card companies did not specify when they would resume reporting actual payment information. Although companies generally acknowledged the positive benefits of sharing credit performance data for consumers and the economy, they did not provide a timeline for reverting to their previous practice of reporting actual payment information. Some companies explicitly stated they had no intention of doing so.
Companies suppressed data to reduce competition. Responses suggested that companies withheld information to make it difficult for competitors to offer better rates, products, or services to their more profitable and less risky customers. Some companies mentioned they noticed other credit card companies had stopped sharing actual payment information and did not want to be at a competitive disadvantage by continuing to provide data their competitors had chosen to withhold.
By withholding actual payment data, the largest credit card companies are obstructing consumers’ ability to shop for credit and save money. Consumers reasonably expect their positive credit behaviors, such as paying credit card bills in full each month, to be reflected in their consumer credit reports and the credit offers they receive. The CFPB will continue to monitor and address credit card company practices that hinder effective market competition, such as the suppression of actual payment data. They will also inform relevant financial regulators and law enforcement agencies of their findings.
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