The Consumer Financial Protection Bureau is accusing the six largest U.S. credit card companies of hurting their customers' credit scores by failing to report their full payments to credit bureaus.
Millions of U.S. credit card holders could see at least a 20-point jump in their scores if the companies reported borrowers' monthly repayments, the agency said in a summary of its findings. Customers whose credit scores rose would get better offers from other card issuers, the CFPB said.
JPMorgan Chase, Citigroup, Bank of America, Capital One Financial, Discover Financial Services and American Express either never reported their payments or stopped doing so in quick succession around 2013, according to the CFPB.
"By suppressing actual payment data, the largest credit card companies are making it harder for people to shop for credit and save money," the agency said in a
The agency, which has been scrutinizing various aspects of the card industry, last year
The CFPB received information from all six card issuers it contacted, though the summary it released last week did not detail each company's responses by name. In their responses to the agency, three of the companies said that providing the data in question to credit bureaus is voluntary, according to the CFPB.
One of the companies said that it does not believe the "benefits outweigh proprietary interests," and another said it doesn't think the "cost of furnishing is worth it," the CFPB wrote. One company said that it decided to stop providing the information because it was at a "competitive disadvantage" after other card issuers stopped doing so.
The specific information that has drawn the CFPB's focus is the actual amount each borrower repays each month, rather than the minimum payment due or the account's outstanding balance.
The six companies listed in the CFPB letter either declined to comment or did not immediately respond to a request for comment.
A spokesperson for the Consumer Bankers Association said that the trade group is still reviewing the CFPB's report "but would reiterate that the credit card marketplace is among the most competitive and transparent in the world."
Bank industry critics expressed support for the CFPB's scrutiny, arguing that by failing to provide customers' full payment information, lenders are reducing the risk that competitors will poach their customers.
"The credit card issuers see a competitive advantage in not reporting this information," said Chi Chi Wu, a staff attorney at the National Consumer Law Center. "If you look at someone's credit report and you see they pay off their balance and not just the minimum payment — that is valuable information that the person might be a better credit card risk, and they are trying to avoid having that consumer poached."
Wu said she thinks the CFPB is laying the groundwork for card issuers to be hit with violations of the Fair Credit Reporting Act. The companies are providing incomplete or missing information, which could also be inaccurate, Wu said.
In another recent example of the CFPB's tougher scrutiny of the card industry, the agency early this month
In their responses to the CFPB about credit reporting, two of the six companies said they did not previously furnish actual payment information, while the other four acknowledged that they suddenly stopped doing so years ago.
The responses "indicated that one large credit card company moved first, and other players suppressed data shortly thereafter," the bureau said. None of the companies have plans in place to begin providing the information again, and a few of them cited operational difficulties in doing so, according to the CFPB.
The agency raised the possibility that the banks colluded, though it did not draw any conclusions on that issue. The analysis "did not seek to investigate whether entities explicitly colluded," the bureau said in its letter.
The CFPB said in its blog post that bureau officials will "brief the appropriate financial regulators and law enforcement agencies on our findings," as the agency continues to monitor any credit card practices that "impede effective market competition."
The agency declined to say whether it believes the six largest card issuers are colluding. A CFPB spokesperson said the bureau does not have "any further comment beyond" the letter and blog post, which was written by CFPB Assistant Director John McNamara.
The card industry's credit reporting practices are "much more subtle" than the explicit collusion that has occurred in other sectors throughout U.S. history, said Ed Mierzwinski, senior director of U.S. PIRG's federal consumer program. But they nonetheless limit customers' ability to "shop around for the best prices," Mierzwinski said.
"They're all agreeing not to compete. That's a very big deal," Mierzwinski said.
