After a Consumer Financial Protection Bureau (CFPB) rule was overturned in federal court, banks have been hesitant to reverse the interest rate hikes and new fees they imposed last year. These changes were initially triggered by the CFPB’s proposed regulation aimed at limiting credit card late fees. Synchrony and Bread Financial, major players in the retail credit card market for brands like Amazon, Lowe’s, and Wayfair, have maintained their higher rates, despite the ruling.
Synchrony CEO Brian Doubles stated that the company felt secure after the rule was vacated and had no immediate plans to reduce the changes they made. Similarly, Bread CEO Ralph Andretta confirmed that they would not be rolling back the changes, informing their partners accordingly. These two companies, along with others in the industry, have benefited from the end of the CFPB’s proposed regulation, which they argued was an overreach. The rule was intended to save consumers an estimated $10 billion annually by limiting late fees, but in practice, it led to higher interest rates and fees for paper statements as companies sought to recover lost revenue.
Retail card interest rates soared to an average of 30.5% last year, with little change since. As a result, companies like Synchrony and Bread Financial have seen significant profit increases, exceeding analysts’ expectations. Although credit card companies argue that these changes were necessary to offset the loss of revenue from the CFPB rule, critics suggest that they are now profiting at the expense of consumers. David Silberman, a banking attorney, described this as a “windfall” for the companies, with the higher fees directly impacting consumers.
Retail cards are particularly vulnerable for financially struggling Americans, with more than 160 million open accounts last year. These cards are often used by individuals with subprime or no credit scores, who are more likely to carry balances and pay late fees. Despite the higher rates, many retail card users continue to rely on these cards due to promotional offers or rewards points, which companies like Synchrony and Bread rely on to maintain profitability. This leaves consumers in a difficult position, often trapped in debt cycles that are exacerbated by predatory practices.
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