A customer uses a credit card to pay for items January 28, 2022 at a retail shop in New York City.
Robert Nickelsberg | Getty Images
Banks that issue credit cards used by millions of consumers raised interest rates and introduced new fees over the past year in response to an impending regulation that most experts now believe will never take effect.
Synchrony and Bread Financial, which specialize in issuing branded cards for companies including Verizon and JCPenney, have said that the moves were necessary after the Consumer Financial Protection Bureau announced a rule slashing what the industry can charge in late fees.
“They’re the two banks that have been most vocal about it, because they were going to be the most impacted by it,” said Sanjay Sakhrani, a KBW analyst who covers the card industry. “The consensus now, however, is that the rule isn’t going to happen.”
The effect is that proposed regulation intended to save consumers money has instead resulted in higher costs for some.
On Nov. 22, CNBC reported that rates on a wide swath of retail cards have jumped in the past year, reaching as high as 35.99%. Synchrony and Bread raised the annual percentage rates, or APRs, on their portfolios by an average of 3 to 5 percentage points, according to Sakhrani.
On top of that, customers of the two banks have been given notice of new monthly fees of between $1.99 and $2.99 for receiving paper statements.
Customers of Synchrony bank have received notices for new monthly fees for receiving paper statements, part of the industry’s response to a CFPB rule capping late fees.
Source: Synchrony
Bread, which issues cards for retailers including Big Lots and Victoria’s Secret, began boosting the rate on some of its cards in late 2023 “in anticipation” of the CFPB rule, Bread CFO Perry Beberman told analysts in October.
“We’ve implemented a number of changes that are in market, including the APR increases and paper statement fees,” Beberman said at the time.
In March, the agency introduced a rule to cap late fees at $8 per incident, down from an average of about $32. The rule would save consumers $10 billion annually, the regulator said.
But banks and their trade groups have argued that late fees are a necessary deterrent to default and that capping them at $8 per incident would shift costs to those who pay their bills on time.
The U.S. Chamber of Commerce, which calls itself the world’s largest trade group, sued the CFPB in March to halt the rule, arguing that the agency exceeded its authority. In May, days before the rule was set to take effect, a federal judge granted the industry’s request to halt its implementation.
While the rule is currently held up in courts, card users are already dealing with the higher borrowing costs and fees attributed to the regulation.
The higher APRs kick in for new loans, not old debts, meaning the impact to consumers will rise in coming months as they accumulate fresh debts to fund holiday spending. Americans owe a record $1.17 trillion on their cards, 8.1% higher than a year ago, according to the Federal Reserve Bank of New York.
“Due to changes in regulatory conditions, we adjusted rates and fees to ensure that we can continue to provide safe and convenient credit to our customers,” said a spokeswoman for Stamford, Connecticut-based Synchrony.
Customers can avoid interest and fees by paying off balances in full and opting out of paper statements, the spokeswoman said.
Citigroup, Barclays
The surge in borrowing costs will have a bigger impact on consumers with lower credit scores who are more likely to have store cards issued by Synchrony and Bread.
Customers with poorer credit may be considered too risky to qualify for popular rewards cards from issuers including JPMorgan Chase and American Express, and are therefore more likely to turn to co-branded cards as alternatives.
That’s why Synchrony and Bread were eager to mitigate the hit to their operations by increasing rates and introducing fees, according to analysts. The concern was that more of their customers would simply default on loans if late penalties shrank to $8, and the profitability of their businesses would take a dive.
But other, larger banks have moved rates higher as well.
Cards from Banana Republic and Athleta issued by Barclays each saw an APR jump of 5 percentage points in the past year. The Home Depot card from Citigroup had a rise of 3 percentage points, while the bank raised the APR on its Meijer card by 4 percentage points.
Citigroup and Barclays representatives declined to comment.
Capital One, which had warned earlier in the year that it would take steps to offset the hit from the CFPB rule, said that instead of changing its customer pricing it opted to hold back on making certain unspecified investments. The bank is in the process of acquiring rival card issuer Discover Financial.
Even before it was set to take effect in May, the fate of the CFPB rule was considered murky, because litigation fighting it was filed in a venue widely seen as favorable to corporations seeking to beat back federal regulation.
But after the election victory of Donald Trump, who has broadly pushed for deregulation across industries, the expectation is that the next CFPB head isn’t likely to keep the effort alive, according to policy experts.
When asked if they would reverse the higher APRs and fees if the CFPB rule went away, Synchrony managers were noncommittal. The bank has to proceed as though it were happening, CFO Brian Wenzel told analysts in October.
“People use the term ‘rollback,'” Wenzel said. “As a company, we haven’t spent any real time thinking about that.”
— CNBC’s Gabrielle Fonrouge contributed to this report.
Check out the companies making the biggest moves midday: Warner Bros. Discovery – Shares jumped 7% after Warner said it will split into two publicly traded companies by next year. One company will host WBD’s streaming services and movie properties, while the other will include its cable networks such as CNN and TNT Sports. Universal Health Services — The hospital operator fell more than 6% after CFO Steve Filton said at a conference that procedural volumes “have been slower to recover back to historical levels than we might have imagined.” He also raised concerns over how President Donald Trump’s spending bill could evolve as it goes through the Senate, and what that would mean for the hospital industry, according to a FactSet transcript. Topgolf Callaway Brands — The golf equipment stock rallied 8% following director Adebayo Ogunlesi’s disclosure on Friday that he had bought 383,700 shares. Following the transaction, Ogunlesi owns 512,600 shares. Quaker Chemical – The metal processing fluid company, which does business as Quaker Houghton, jumped 10%. On Monday, Jefferies upgraded the stock to buy from hold, seeing more than 33% upside on the back of improving steel demand conditions and increasing infrastructure spending. EchoStar – Shares tumbled 6% after the Wall Street Journal, citing people familiar, reported the telecommunications company is considering filing for bankruptcy under chapter 11 . The company is trying to protect its wireless spectrum licenses that are under review by the Federal Communications Commission, the report said. Apple — Shares of the iPhone maker are up slightly ahead of the company’s closely watched Worldwide Developers Conference in Cupertino, California . Investors are eager to hear more about Apple’s progress on Apple Intelligence, its response to generative AI models, at the meeting, which kicks off at 1 p.m. ET. Apple shares have lagged the market, with an 18% decline year to date. Robinhood , Applovin – Shares of Robinhood and Applovin fell 5% and 4%, respectively, after neither name was added to the S & P 500 on Friday. Both companies were considered possible candidates for inclusion in the index . Robinhood soared more than 13% last week leading up to the rebalance announcement, while Applovin advanced more than 6%. Intuitive Surgical — The surgical product maker slid 7% on the heels of Deutsche Bank’s downgrade to sell from hold. Deutsche said the company’s competitive moat is at risk. IonQ – The quantum computing stock climbed 2% after the company announced that it’s agreed to acquire Oxford Ionics in a deal valued at $1.075 billion in cash and stock. The deal is expected to close in 2025. Circle — Shares of the stablecoin issuer jumped 10%, continuing its post IPO surge . Circle’s stock is now nearly 300% above its $31 per share IPO price. McDonald’s – The fast-food chain’s stock slipped nearly 2% on the heels of a Morgan Stanley downgrade to equal weight from overweight. Morgan Stanley said the company hasn’t been insulated from pressures on the fast food sector. Moelis & Co. — Shares were more than 1% lower. On Monday, The Wall Street Journal reported that CEO Ken Moelis is planning to step down from the role at the investment bank. He said in an interview that he’s expected to become executive chairman, effective Oct. 1. Co-president Navid Mahmoodzadegan is slated to become CEO, the report said. Aon — Shares of the professional services company slipped 4% after Aon reaffirmed its full-year guidance during its investor day Monday. — CNBC’s Sean Conlon, Lisa Han, Alex Harring, Michelle Fox, Christina Cheddar Berk and Jesse Pound contributed reporting.
A Capital One Walmart credit card sign is seen at a store in Mountain View, California, United States on Tuesday, November 19, 2019.
Yichuan Cao | Nurphoto | Getty Images
Walmart‘s majority-owned fintech startup OnePay said Monday it was launching a pair of new credit cards for customers of the world’s biggest retailer.
OnePay is partnering with Synchrony, a major behind-the-scenes player in retail cards, which will issue the cards and handle underwriting decisions starting in the fall, the companies said.
OnePay, which was created by Walmart in 2021 with venture firm Ribbit Capital, will handle the customer experience for the card program through its mobile app.
Walmart had leaned on Capital One as the exclusive provider of its credit cards since 2018, but sued the bank in 2023 so that it could exit the relationship years ahead of schedule. At the time, Capital One accused Walmart of seeking to end its partnership so that it could move transactions to OnePay.
The Walmart card program had 10 million customers and roughly $8.5 billion in loans outstanding last year, when the partnership with Capital One ended, according to Fitch Ratings.
For Walmart and its fintech firm, the arrangement shows that, in seeking to quickly scale up in financial services, OnePay is opting to partner with established players rather than going it alone.
In March, OnePay announced that it was tapping Swedish fintech firm Klarna to handle buy now, pay later loans at the retailer, even after testing its own installment loan program.
One-stop shop
In its quest to become a one-stop shop for Americans underserved by traditional banks, OnePay has methodically built out its offerings, which now include debit cards, high-yield savings accounts and a digital wallet with peer-to-peer payments.
OnePay is rolling out two options: a general-purpose credit card that can be used anywhere Mastercard is accepted and a store card that will only allow Walmart purchases.
Customers whose credit profiles don’t allow them to qualify for the general-purpose card will be offered the store card, according to a person with knowledge of the program.
OnePay didn’t yet disclose the rewards expected with the cards, though the general-purpose card is expected to provide a stronger value, said this person, who declined to be identified speaking ahead of the product’s release. The Synchrony partnership was reported earlier by Bloomberg.
“Our goal with this credit card program is to deliver an experience for consumers that’s transparent, rewarding, and easy to use,” OnePay CEO Omer Ismail said in the Monday release.
“We’re excited to be partnering with Synchrony to launch a program at Walmart that checks each of those boxes and will help serve millions of people,” Ismail said.
Check out the companies making headlines before the bell. Warner Bros. Discovery – Shares jumped nearly 9% after Warner said it will split into two publicly traded companies by next year. One company will host WBD’s streaming services and movie properties, while the other will include its cable networks such as CNN and TNT Sports. Tesla – Shares of the electric vehicle maker dropped about 2% after Baird downgraded the stock to neutral from buy. The firm said that CEO Elon Musk’s comments on robotaxi plans are “a bit too optimistic” and that Musk’s relationship to President Donald Trump adds “considerable uncertainty.” EchoStar – Shares tumbled 11% after the Wall Street Journal, citing people familiar, said the telecommunications company is considering filing for bankruptcy under chapter 11 . The company is trying to protect its wireless spectrum licenses that are under review by the Federal Communications Commission, the report said. Robinhood , Applovin – Shares of Robinhood and Applovin each fell about 4% after neither name was added to the S & P 500 on Friday, as both names were considered possible candidates for inclusion in the index . Robinhood soared more than 13% last week leading up to the rebalance announcement, while Applovin advanced more than 6%. IonQ – The quantum computing stock gained more than 7% after the company announced that it’s agreed to acquire Oxford Ionics in a deal valued at $1.075 billion in cash and stock. The deal is expected to close in 2025. McDonald’s – The fast-food chain’s stock slipped nearly 1% on the heels of a Morgan Stanley downgrade to equal weight from overweight. Morgan Stanley said the company hasn’t been insulated from pressures on the fast food sector. Moelis & Co. – Shares were marginally lower. On Monday, The Wall Street Journal reported that CEO Ken Moelis is planning to step down from the role at the investment bank. He said in an interview that he’s expected to become executive chairman, effective Oct. 1. Co-president Navid Mahmoodzadegan is slated to become CEO, the report said. — CNBC’s Alex Harring, Fred Imbert and Sarah Min contributed reporting.
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