CFPB presses big card issuers on their credit reporting practices

The Consumer Financial Protection Bureau is questioning the largest U.S. credit card issuers about the data they provide to credit bureaus, saying that shifts in industry practices may be hurting consumers’ ability to get cheaper loans.

A top CFPB official wrote this week to the CEOs of JPMorgan Chase, Citigroup, Bank of America, Capital One Financial, Discover Financial Services and American Express, saying that those companies appear to have stopped regularly reporting data on cardholder payments, and asking them to detail their practices.

Consumers’ ability to find cheaper credit is “impaired if actual payment amount information is being suppressed by major credit card companies,” John McNamara, principal assistant director at the CFPB’s research, markets and regulations division, wrote to the bank executives.

Bloomberg

“Without this information, it may be more difficult for lenders to price credit and offer consumers the best valued credit offers and loans for their money,” McNamara wrote in the letters.

The six banks either declined to comment Thursday or didn’t immediately respond to a request for comment.

The Consumer Bankers Association, which represents the six banks, said in a statement that it is “still examining how this non-supervisory request could impact” its members, and that they remain “fully committed to expanding and protecting access to credit for hardworking families.”

“We look forward to working with policymakers on achieving this shared mission, helping to ensure credit remains affordable and attainable for the millions of consumers our members serve,” said David Pommerehn, the group’s general counsel.

When repayment history does get reported to credit bureaus, consumers’ credit scores may receive a credit score boost of at least 20 points, McNamara wrote Wednesday in a separate blog post.

He pointed to a 2020 report from the CFPB, which found that about half of credit card issuers reported repayment data in 2020, down from 70% in 2013. The report attributed the shift to companies not wanting to be at a “competitive disadvantage,” since providing payment data may help competitors “poach their most profitable customers.”

The failure to report payment information makes cardholders “captive customers” to their current company, said Ed Mierzwinski, senior director of the federal consumer program at the advocacy group U.S. Public Interest Research Group. The practice leads to lower credit scores for consumers, who therefore may not qualify for new cards that competitors offer and market by mail, he said.

“Credit cards are something that people shop around for. They want a better deal. They want more rewards,” Mierzwinski said. “And if they hide the information that is accurate about you, then fewer companies are going to want to look for you.”

Mierzwinski and the CFPB official both flagged a 2009 rule from the Federal Trade Commission that requires card issuers to report consumers’ credit limits to credit reporting agencies. The FTC action came in response to concerns that card issuers weren’t providing the information, and were therefore offering a misleading view of cardholders’ debt levels.

The CFPB letter opens a new front in the agency’s increased scrutiny of the credit card industry. CFPB Director Rohit Chopra has suggested the industry’s concentration — eight companies control roughly 70% of the market — may be leading to unfair or anti-competitive lending practices.

Chopra has also criticized card issuers for collecting some $12 billion in late fees in 2020 — comments that some bankers and analysts see as a prelude to the agency reducing the maximum amount companies can charge. The current limits are $30 for first-time late fees and $41 for recurring fees.

Consumers “should have confidence that their information is useful, accurate and complete,” McNamara wrote in his blog post.

“We’ll share what we learn about why actual payment information has largely gone missing from the nationwide credit reporting system, and what the largest credit card companies might do to fix it.”