U.S. Credit Card Industry: Competitive Developments Need to Be Closely Monitored
GGD-94-23
Published: Apr 28, 1994. Publicly Released: Apr 28, 1994.
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Highlights
Pursuant to a congressional request, GAO reviewed the competitiveness of the U.S. credit card industry, focusing on: (1) whether the industry's structure supports competition; (2) why the credit card industry has had relatively stable interest rates and high earnings; and (3) the proposed interest rate cap and other policy options.
Recommendations
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Federal Reserve System | The Chairman of the Federal Reserve should collect additional information on credit card interest rates that permits an assessment of the extent to which cardholders are benefiting from lower credit card interest rates and an assessment of how these rates affect industry earnings. |
Closed – Implemented
The Federal Reserve has implemented the recommendation, and is now collecting and publishing additional data about credit card interest rates. Specifically, the Federal Reserve is disseminating data about the average interest rate charged to all cardholders as well as the effective interest rates paid by consumers who revolve credit card debt. This data as of November 1994 have already been published while data for February 1995 will be published soon (the Federal Reserve collects this data quarterly in the second month of each quarter). The information contained in these new reports should benefit analysts who assess the competitiveness of the U.S. credit card industry and the interest rates paid by cardholders.
|
| Federal Reserve System | The Chairman of the Federal Reserve should assess the short- and long-term impacts of competitive developments within the industry. |
Closed – Implemented
As required by the Fair Credit and Charge Card Disclosure Act of 1988, the Federal Reserve issued annual reports on the profitability of the credit card industry. In the five reports issued to date, the Federal Reserve has commented on major developments in the industry that affect competition and profitability over the short and long term, such as the entrance of new issuers or changes in costs. A Federal Reserve official said that the organization will use the new information on credit card interest rates to expand on these profitability reports. The first annual profitability report to include this information will be published in September 1995. This expanded analysis in the profitability reports should benefit those who assess the competitiveness of the U.S. credit card industry and the interest rates paid by cardholders.
|
| Federal Reserve System | The Chairman of the Federal Reserve should incorporate the credit information and analysis in the annual report to Congress on industry profitability to assist Congress in making informed public policy decisions. |
Closed – Implemented
As required by the Fair Credit and Charge Card Disclosure Act of 1988, the Federal Reserve issued annual reports on the profitability of the credit card industry. In the five reports issued to date, the Federal Reserve has commented on major developments in the industry that affect competition and profitability over the short and long term, such as the entrance of new issuers or changes in costs. A Federal Reserve official said that the organization will use the new information on credit card interest rates to expand on these profitability reports. The first annual profitability report to include this information will be published in September 1995. This expanded analysis in the profitability reports should benefit those who assess the competitiveness of the U.S. credit card industry and the interest rates paid by cardholders.
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Topics
CollusionCompetitionConsumer protectionCreditCredit salesData collectionDebtInterest ratesLending institutionsMonopolies