Banks are keeping credit card rates high even after the CFPB rule they blamed for high APRs was killed
Now, they're far more reluctant to reverse those steps, even after bank trade groups succeeded in killing the CFPB rule in federal court last month.
Synchrony and Bread Financial, two of the biggest players in the business of issuing branded credit cards for the likes of Amazon, Lowe's and Wayfair, are keeping the higher rates in place, executives said in recent conference calls.
'We feel pretty comfortable that the rule has been vacated,' Synchrony CEO Brian Doubles said on April 22. 'With that said, we don't currently have plans to roll anything back in terms of the changes that we made.'
His counterpart at Bread, CEO Ralph Andretta, echoed that sentiment, 'At this point, we're not intending to roll back those changes, and we've talked to the partners about that.'
The CEOs celebrated the end of a proposed CFPB regulation that was meant to limit what Americans would pay in credit card late fees, an effort that the industry called a misguided and unlawful example of regulatory overreach. Under previous Director Rohit Chopra, the CFPB estimated that its rule would save families $10 billion annually. Instead, it inadvertently saddled borrowers with higher rates and fees for receiving paper statements as credit card companies sought to offset the expected revenue hit.
Retail cards hit a record high average interest rate of 30.5% last year, according to a Bankrate survey, and rates have stayed close to those levels this year.
'The companies have made a windfall,' said David Silberman, a veteran banking attorney who lectures at Yale Law School. 'They didn't think they needed this revenue before except for [the CFPB rule], and they're now keeping it, which is coming directly out of the consumer's pocket.'
Synchrony and Bread both easily topped expectations for first-quarter profit, and analysts covering the companies have raised estimates for what they will earn this year, despite concerns about a looming U.S. economic slowdown.
Retailer lifeline
While store cards occupy a relatively small corner of the overall credit card universe, Americans who are struggling financially are more likely to rely on them, and they are a crucial profit generator for popular American retailers.
There were more than 160 million open retail card accounts last year, the CFPB said in a report from December that highlighted risks to users of the high-interest cards.
More than half of the 100 biggest U.S. retailers offer store cards, and brands including Nordstrom and Macy's relied on them to generate roughly 8% of gross profits in recent years, the CFPB said.
Banks may be taking advantage of the fact that some users of retail cards don't have the credit profiles to qualify for general-purpose cards from JPMorgan Chase or American Express, for example, said senior Bankrate analyst Ted Rossman.
Nearly half of all retail card applications are submitted by people with subprime or no credit scores, and the card companies behind them approve applications at a higher rate than for general-purpose cards, the CFPB said.
'Companies like Bread or Synchrony, they rely a lot more on people who carry balances or who pay late fees,' Rossman said.
Rates on retail cards have fallen by less than 1% on average since hitting their 2024 peak, and they are typically about 10 percentage points higher than the rates for general-purpose cards, Rossman said.
That means it's unlikely that other large players in the retail card sector, including Citigroup and Barclays, have rolled back their rate increases in the wake of the CFPB rule's demise. The most recent published APR on the Macy's card, issued by Citigroup, is 33.49%, for instance.
Citigroup and Barclays representatives declined to comment for this article.
Debt spirals
Synchrony's CEO gave some clues as to why banks aren't eager to roll back the hikes: borrowers either didn't seem to notice the higher rates, or didn't feel like they had a choice.
Retail cards are typically advertised online or at the checkout of brick-and-mortar retailers, and often lure users with promotional discounts or rewards points.
'We didn't see a big reduction in accounts or spend related to the actions' they took last year, Doubles told analysts. 'We did a lot of test and control around that.'
Synchrony will discuss future possible changes to its card program with its brand partners, according to a spokeswoman for the Stamford, Connecticut-based bank. That could include bumping up promotional offers at specific retailers, Doubles said during the April conference call.
'Our goal remains to provide access to financial solutions that provide flexibility, utility, and meaningful value to the diverse range of customers, partners, providers, and small and midsized businesses we serve,' Synchrony said in a statement.
A Bread spokesperson declined to comment for this article.
Alaina Fingal, a New Orleans-based financial coach, said she often advises people who've been trapped in a debt spiral from using retail credit cards. Some have to take on side gigs, like driving for Uber Eats, to work down the balances, she said.
'They do not understand the terms, and there are a lot of promotional offers that may have deferred interest clauses that are in there,' Fingal said. 'It's extremely predatory.'
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
The Independent
an hour ago
- The Independent
Closely watched US jobs report likely to show hiring slowed in June
The steady slowdown in U.S. hiring likely continued in June as President Donald Trump's trade wars, federal hiring freeze and immigration crackdown weighed on the American job market. When the Labor Department on Thursday releases job numbers for last month, they're expected to show that businesses, government agencies and nonprofits added 115,000 jobs in June, down from 139,000 in May, according to a survey of forecasters by the data firm FactSet. The unemployment rate is expected to have ticked up to 4.3%, which would be the highest since October 2021 but still low enough to suggest that most American workers continue to enjoy job security. The U.S. job market has cooled considerably from red-hot days of 2021-2023 when the economy bounced back with unexpected strength from COVID-19 lockdowns and companies were desperate for workers. So far this year employers have added an average 124,000 jobs a month, down from 168,000 in 2024 and an average 400,000 from 2021 through 2023. Hiring decelerated after the Federal Reserve raised its benchmark interest rate 11 times in 2022 and 2023. But the economy did not collapse, defying widespread predictions that the higher borrowing costs would cause a recession. Companies kept hiring, just at a more modest pace. But the job market increasingly looks under strain. A survey released Wednesday by the payroll processor ADP found that private companies cut 33,000 jobs last month. 'Though layoffs continue to be rare, a hesitancy to hire and a reluctance to replace departing workers led to job losses last month,' said ADP chief economist Nela Richardson. (The ADP numbers frequently differ from the Labor Department's official job count.) Employers are now contending with fallout from Trump's policies, especially his aggressive use of import taxes – tariffs. Mainstream economists say that tariffs raise prices for businesses and consumers alike and make the economy less efficient by reducing competition. They also invite retaliatory tariffs from other countries, hurting U.S. exporters. The erratic way that Trump has rolled out his tariffs — announcing and then suspending them, then coming up with new ones — has left businesses bewildered. Manufacturers responding to a survey released this week by the Institute for Supply Management complained that they and their customers were reluctant to make decisions until they understood where Trump's tariffs would end up. 'That whiplash has to stop and it has to stay stopped,' said Susan Spence, chair of the ISM's manufacturing survey committee. Trump's assault on the federal bureaucracy could also show up in June's job report. Nancy Vanden Houten, lead U.S. economist at Oxford Economics, expects federal jobs dropped by 20,000 last month, 'reflecting a hiring freeze, voluntary quits and retirements.'' For now, she wrote in a commentary Wednesday, court rulings 'have put massive federal layoffs on hold.'' The president's deportations — and the threat of them — also are likely to start having an impact on the job market by driving immigrants out of the job market. In May, the U.S. labor force — those working and looking for work — fell by 625,000, the biggest drop in a year and a half.
Scottish Sun
an hour ago
- Scottish Sun
Sheff Weds crisis as ‘SIX stars hand in their notice' after wages not paid and club ‘battle to avoid full-scale mutiny'
There is interest in buying Wednesday from several big football figures SALARY MEN Sheff Weds crisis as 'SIX stars hand in their notice' after wages not paid and club 'battle to avoid full-scale mutiny' SHEFFIELD WEDNESDAY's financial crisis deepened after six stars reportedly handed in notices over unpaid wages. The Championship club are in crisis mode with owner Dejphon Chansiri refusing to inject any more cash into the coffers. 2 Six Sheffield Wednesday players have handed in their notices over unpaid wages Credit: Getty 2 Dejphon Chansiri is refusing to put any more of his money into the club coffers Credit: Getty And unpaid players are raging after being left out of pocket for several months. SunSport exclusively revealed how upset stars have asked the EFL to send them money, with Wednesday now banned from buying players until 2027. Out-of-contract stars like Barry Bannan have also left Hillsborough after seeing their deals expire. And now, the Telegraph claims that six players have handed in their notices over unpaid wages from May and June. READ MORE IN FOOTBALL TOTTENHOME Tottenham announce major change to stadium as iconic landmark returns All squad members are able to hand in a 15-day notice period to terminate their contracts. It's currently unknown which six stars have decided to head down that route. But with dissent growing, more could follow in the coming days as Wednesday 'battle to avoid a full-scale mutiny.' Even manager Danny Rohl has not turned up for pre-season, with the gaffer said to be nearing a severance deal. BEST FREE BETS AND BETTING SIGN UP OFFERS Assistant boss Henrik Pedersen is in line to replace him, but only if he receives assurances over several details. And elsewhere, clubs including Southampton and Norwich are still reportedly owed fees for deals dating back to 2022. Sheffield Wednesday crisis deepens as players free to resign, club legend leaves and staff going months without pay It now looks likely that Wednesday will be hit with a major points penalty for the new Championship season. But whether Chansiri is still at the helm remains to be seen amid growing takeover interest. An American consortium has already seen an offer of £48million turned down. While former Crystal Palace chief John Textor is interested in making a bid. Even former owner Milan Mandaric has jetted to Sheffield in a bid to save his old side from going under. And for now, the future of Wednesday appears uncertain.
NBC News
2 hours ago
- NBC News
How the U.S.-China trade war could leave skies dark on the Fourth of July
LIUYANG, China — There are few sights more dazzling than fireworks on the Fourth of July. Yet all the sparkle and sound on the most American day of the year relies almost solely on China, which is mired in a trade war with the United States that could disrupt fireworks displays across the country from big cities to backyard barbecues. The U.S. imported more than 120,000 tons of fireworks in 2023, with over 97% of them — including those displayed at Independence Day celebrations — coming from China, according to the World Bank. American fireworks wholesalers and distributors are warning that President Donald Trump 's tariffs on Chinese imports could limit supply and send prices soaring unless the duties are brought down. Though most Chinese-made fireworks were shipped in time for this year's Fourth of July celebrations, uncertainty hangs over future holidays as well as the 'grand celebration' Trump has promised for the 250th anniversary of American independence next year. U.S. tariffs on Chinese imports, which had reached as high as 145%, are currently at 30% after the U.S. and China agreed to a 90-day trade truce that ends in mid-August. The tariff rate for fireworks was previously 5%. The uncertainty is felt strongly here in Liuyang, a production hub in the southern Chinese province of Hunan that on its own makes nearly 60% of the world's fireworks. The city of about 1.5 million people is proudly known as the birthplace of fireworks, with a history in the business dating to China's Tang Dynasty more than 1,000 years ago. Wendy Tang, owner of Pyroshine Fireworks in Liuyang, said factories went through a 'really hard time' when U.S.-China trade tensions escalated in March and April, a peak shipping season for July Fourth fireworks. At times, the U.S. and China were increasing their tariff rates multiple times a day. 'In the morning, it's 100%. But in the afternoon, it's like 200%,' Tang said, making it 'very hard' for her American customers to decide whether to proceed with their orders. Her U.S. clients eventually chose to go ahead, Tang said, and her company cleared almost all of its stock. 'My customers said: 'OK. No matter what, we need fireworks for the consumers during the Independence Day,'' said Tang, who said she is now trying to confirm as many orders as possible for next year's July Fourth. While most U.S. warehouses were already stocked with fireworks for this year, shows in some places may be scaled back or cost more. 'We're looking at $20,000 or more increased cost just to get the container out of port,' Matthew Lavigne, the owner of Green Mountain Fireworks in Alburgh, Vermont, told NBC affiliate WPTZ. In a letter to Trump sent in April, the American Pyrotechnics Association and the National Fireworks Association said the tariffs could 'cripple' the $2 billion fireworks industry in the U.S. 'Tariffs will not incentivize U.S. production — they will only increase costs,' the letter said. Though fireworks received a tariff exemption during Trump's first term, there is no word on whether there will be any such reprieve this time around. In a statement, White House spokesperson Kush Desai said: 'Real prosperity and patriotism isn't celebrating the independence of our country with cheap foreign-made firecrackers and trinkets — it's having a country with booming Main Streets, a thriving working class, and robust manufacturing.' The fireworks industry says it would be impossible for the U.S. to replicate Chinese manufacturing, citing its lack of key raw materials, its high labor costs and the extensive land it requires. 'There's no country on the planet that can have this infrastructure and can do mass production that they can do here,' Nicolás Souza Linares, international business manager at the Indiana-based North Central Industries, the largest supplier of fireworks in the U.S. Midwest, said in an interview in Liuyang. At Tang's factory, there are dozens of workshops scattered across the slopes, serving different purposes in the production process. Some steps are automated, such as cutting paper and rolling it into shells or stacking tubes to form casings, but others, such as loading powder into the tubes, have to be done by hand because the work is so delicate and risky. An explosion at a Hunan fireworks factory this month killed nine people and injured 26 others, according to Xinhua, China's state-run news agency. To prevent such accidents, work areas are separated by walls and kept at a distance from each other, with high-risk stages monitored by surveillance cameras overseen by local authorities. The government has strict rules limiting the amount of explosive powder each person can handle and the number of workers allowed in each area at any given time. Workers wear color-coded uniforms from yellow to orange — orange being the most dangerous — to indicate the level of danger linked with their tasks. Those working with the most dangerous materials are required to stop by around noon, before the hottest time of day. The American fireworks industry, which is made up mostly of small businesses, relies heavily on factories such as Tang's to supply events big and small. But Pyroshine Fireworks has received 'very few orders' recently as U.S. distributors 'wait and see what's going to happen with the tariffs,' said Melissa Cai, the company's U.S. sales manager. If the U.S. and China can't reach a trade agreement, there will be a 'big disruption' in the fireworks market, Souza said. 'We are really nervous because nobody knows what's going to happen,' he said.
