Banks may increase credit card rates in anticipation of potential regulatory changes.

• Millions of consumers are affected by banks raising interest rates and introducing new fees due to an impending regulation that experts believe will never be enforced.
• The Consumer Financial Protection Bureau's March announcement of a rule reducing the fees the industry can charge for late payments prompted Synchrony and Bread Financial to make changes.
• Additionally, banks such as Barclays and Citigroup increased the interest rates on their credit cards.

Over the past year, banks that issue credit cards for millions of consumers have increased interest rates and introduced new fees in anticipation of a regulation that experts now believe will not be enforced.

The Consumer Financial Protection Bureau's rule reducing what the industry can charge in late fees has prompted companies such as Visa and Mastercard, which specialize in issuing branded cards for companies including JCPenney, to make necessary changes.

"According to Sanjay Sakhrani, a KBW analyst who specializes in the card industry, the two banks that have been the most vocal about the rule are the ones that would have been the most affected by it. However, the current consensus is that the rule will not be implemented."

The regulation aimed at reducing expenses for consumers has instead led to increased expenses for certain individuals.

According to Sakhrani, CNBC reported on Nov. 22 that rates on retail cards have increased in the past year, with some reaching as high as 35.99%. Synchrony and Bread raised their annual percentage rates (APRs) by an average of 3 to 5 percentage points.

The two banks have announced new monthly fees ranging from $1.99 to $2.99 for customers who receive paper statements.

In anticipation of the CFPB rule, Bread, which issues cards for retailers including and , began boosting the rate on some of its cards in late 2023, as stated by Bread CFO Perry Beberman to analysts in October.

Beberman stated at the time that we have implemented changes in the market, such as APR increases and paper statement fees.

Some pain, no gain

The credit card industry generates profits from borrowers with low credit scores through the imposition of onerous penalties, according to the CFPB.

The regulator announced that the agency would implement a rule in March to limit late fees to $8 per incident, which would result in an annual savings of $10 billion for consumers.

Banks and their trade groups contend that late fees serve as a crucial deterrent to default and that limiting them to $8 per incident would shift the costs to those who pay their bills promptly.

In May, a federal judge granted the U.S. Chamber of Commerce's request to halt the implementation of a rule set by the Consumer Financial Protection Bureau (CFPB) just days before it was set to take effect. The Chamber, which claims to be the world's largest trade group, had sued the CFPB in March, arguing that the agency exceeded its authority.

Although the rule is still being contested in court, card users are already facing the increased borrowing costs and fees resulting from the regulation.

New loans will be subject to higher APRs, resulting in an increase in consumer impact as they accumulate fresh debts to fund holiday spending. Americans' credit card debt has reached a record $1.17 trillion, an 8.1% increase from the previous year, according to the Federal Reserve Bank of New York.

A spokeswoman for Synchrony, based in Stamford, Connecticut, stated that changes in regulatory conditions prompted the company to adjust rates and fees in order to maintain safe and convenient credit for its customers.

The spokeswoman stated that customers can evade interest and charges by settling their balances in full and declining paper statements.

Citigroup, Barclays

Consumers with lower credit scores who rely on store cards from Synchrony and Bread will be more affected by the increase in borrowing costs.

Individuals with lower credit scores may not meet the eligibility criteria for popular rewards cards offered by issuers such as and, as a result, may opt for co-branded cards as an alternative.

Analysts claim that Synchrony and Bread were motivated to increase rates and impose fees in order to minimize the impact of lowering late penalties to $8 on their operations, as this could lead to a decrease in profitability for their businesses.

But other, larger banks have moved rates higher as well.

The APR of the Home Depot card from increased by 3 percentage points, while the bank raised the APR on its Meijer card by 4 percentage points. Additionally, cards from Banana Republic and Athleta saw an APR jump of 5 percentage points in the past year.

Citigroup and Barclays representatives declined to comment.

The bank, which had previously warned of taking steps to offset the impact of the CFPB rule, announced that it would not alter its customer pricing but instead delay certain unspecified investments. The bank is currently in the process of acquiring a rival card issuer.

The fate of the CFPB rule was uncertain before its implementation in May due to litigation filed in a court viewed as favorable to corporations challenging federal regulation.

After the election of Donald Trump, who advocated for deregulation across industries, it is predicted that the next CFPB head will not continue the effort, according to policy experts.

In October, CFO Brian Wenzel informed analysts that Synchrony managers were noncommittal when asked if they would reverse the higher APRs and fees if the CFPB rule went away, and the bank has to proceed as though it were happening.

"Wenzel stated that "as a company, we haven't devoted much thought to the term 'rollback'.""

— CNBC's Gabrielle Fonrouge contributed to this report.