The 175-page report released Wednesday comes as the CFPB is expected to finalize a proposed rule that aims to cut credit card late fees to $8, potentially wiping out up to $9 billion a year in profits for banks and credit card issuers. Currently, credit card late fees average $30 for the first offense and $41 for subsequent missed payments. The CFPB's proposal would no longer allow late fees to be pegged annually to inflation.

Last year, consumers were charged $14.5 billion in late fees as credit card debt surpassed $1 trillion for the first time, the CFPB found. Annual spending on credit cards increased to $3.2 trillion. A key takeaway from the report is that more borrowers are getting caught in "persistent debt," with one in 10 charged more in interest and fees than they pay toward principal each year. 

With rising interest rates, consumers are paying more on revolving credit. Borrowers who carried credit card balances paid 94% of total interest and fees last year. Credit card rewards programs also are getting closer scrutiny because roughly three-quarters of rewards go to consumers who pay off their balances each month.

"Last year, Americans paid $130 billion in interest and fees on their credit cards," CFPB Director Rohit Chopra said in a press release. "With credit card debt crossing the trillion dollar mark, we will be working to prevent bait-and-switch tactics when it comes to rewards and to increase refinancing activity so consumers can get lower rates."

The report also examined the profitability of the credit card industry and the costs of credit card rewards. The CFPB said that credit card issuers' profitability is relevant to consumers because "the revenue and expenses of credit card companies drive the cost and value of the product." The bureau also said that profits associated with credit card operations consistently exceed earnings for other bank activities. 

Last year, the average return on assets on credit card lending activities for banks was 5.9% for general purpose credit cards and 2.1% for private label — rates that are roughly the same as they were in 2019 before the pandemic. The CFPB also said that issuers' profit margins are rising because many companies are pricing annual percentage rates further above the prime rate, an issue the CFPB said may potentially signal "a lack of price competition." The CFPB said it is exploring ways to promote comparison shopping on purchase APRs — a major cost of credit cards that is often unknown to consumers. 

The data shows that more cardholders are being charged late fees, are falling behind on payments and are facing higher costs on growing debt. The average cardholder carried $5,288 in total credit card debt across general purpose and private label cards at the end of 2022, up 24% from 2021 but in line with 2019 levels. 

Credit card issuers generally offer more generous rewards and sign-up bonuses to win new accounts, which largely benefit consumers with higher credit scores who pay their balances in full each month. The bureau also is monitoring changes in the value of rewards programs if issuers look to cut costs in response to lower revenue. Card issuers typically use interchange revenue — which is set by card networks Visa and Mastercard and paid by merchants — to cover the cost of both interchange expense and rewards expense.