Banks Jack Up Credit Card Rates as Promised Regulations Stall in Limbo

Some credit card companies have been hedging their bets and taking action in anticipation of proposed U.S. government regulation. In March, the Consumer Financial Protection Bureau (CFPB) announced it wanted a cap on late payment fees. In response, a few banks created new fees and raised interest rates. Yet not only are the new CFPB rules not officially in effect, but they may never be finalized.

In an attempt to save consumers billions of dollars every year, the CFPB issued guidance that would limit credit card late payment fees to $8 per incident, which is significantly less than the industry average of $32. Opponents of the rule have claimed the threat of a high late fee encourages consumers to keep their accounts current.

To stop the new rule from taking effect, the U.S. Chamber of Commerce filed a lawsuit against the CFPB. The government agency allegedly exceeded its authority, according to the chamber’s argument. Currently, implementation of the late fee rule is on hold while the courts decide its legitimacy.

An Added Fee and Higher Rates on Retail Credit Cards

Two banks, in particular, have added new fees and increased interest rates for credit cards: Bread Financial and Synchrony. On average, these two issuers have increased APR by 3 to 5 percentage points. In addition, the two banks now charge their customers up to $2.99 for a mailed paper statement.

“We’ve implemented a number of changes that are in market, including the APR increases and paper statement fees,” stated Bread CFO Perry Beberman in October, per CNBC.

Higher interest rates and late fees typically affect consumers with poor credit. Banks like Bread and Synchrony, which specialize in store-branded cards like JCPenney, often make it easy for consumers with lower credit scores or shaky credit history to qualify for an account.

The increase in rates from these banks is a move to hedge against potential losses as their customers are more likely to default. With a low late fee of $8, the issuers fear consumers won’t have a large enough incentive to avoid default, which could substantially hurt profit.

If the CFPB rule does get killed by the courts, it’s unlikely the banks will reverse course. With the new higher rates and fees already implemented, they are probably here to stay. According to Synchrony CFO Brian Wenzel, the bank has to act as if the CFPB rule isn’t going away.

“People use the term ‘rollback,’” Wenzel said, per CNBC. “As a company, we haven’t spent any real time thinking about that.”

A survey done by Bankrate revealed over two dozen issuers of store-branded credit cards raised interest rates on consumers between September 2023 and September 2024. Among the list were Big Lots, Petco, Macy’s, Gap, and Burlington. While traditionally these cards do not charge higher than 29.99% APR, consumers saw rates go as high as 35.99% in the past year.