CFPB Turns to Credit Card Fees and Late Payments in Advanced Rulemaking Notice

CFPB logoThe CFPB has set its sights on credit card fees, particularly for late payments, in a comment request due July 22.

06/28/2022 10:00 A.M.

4 minute read

The Consumer Financial Protection Bureau is doubling down on its focus on financial services fees with its latest advance notice of proposed rulemaking (ANPR), which will examine credit card fees.

This spring, the bureau completed a request for information (RFI) regarding fees related to consumer financial products or “junk fees,” ACA International previously reported.

In that RFI, the CFPB notes that in 2017, “after observing many abuses,” it issued a Compliance Bulletin on unfair, deceptive, and abusive acts or practices related to fees for making payments over the phone, and potential violations of the Fair Debt Collection Practices Act. The RFI states, “These kinds of convenience fees are still common.”

Now, while the CFPB processes comments on the “junk fees,” it is “seeking data about credit card late fees and late payments, assessing whether those fees are ‘reasonable and proportional,’” according to a news release on the ANPR. “We are also seeking data about card issuers’ revenue and expenses, the potential deterrent effect of late fees, and the role late fees play in credit card companies’ profitability,” the bureau reports.

Under the Consumer Financial Protection Act, the CFPB has the authority to adjust late fee provisions and under the ANPR it will review the Federal Reserve’s immunity provision of the Credit Card Accountability and Disclosure (CARD) Act, which, according to the CFPB, allows credit card companies to “escape enforcement scrutiny if they set fees at a particular level.”

The ANPR seeks comment on topics such as how credit card issuers set late fee amounts and their costs and losses associated with late payments, among others.

“When Congress passed the CARD Act, the law mandated new disclosures and underwriting standards, restricted interest rate increases on balances, and set standards for when credit card companies can penalize their customers with fees,” CFPB Director Rohit Chopra said in prepared remarks on the ANPR. “For example, Congress established that bills must be due on the same date each month and that issuers generally cannot charge a late fee unless customers are given at least 21 days to pay their bill.”

In 2010, Congress transferred authorities the Federal Reserve to the CFPB, which includes enforcement of the CARD Act. The CFPB is now reviewing the Fed’s credit card rules, starting with late fees, Chopra said.

“We are also examining whether it is appropriate for credit card companies to receive immunity from enforcement if they hike the cost of credit card late fees each year by the rate of inflation,” he said.

Congressional Reaction

The House Financial Services Committee held a hearing in March related to the CFPB’s focus on overdraft fees that were the subject of the earlier RFI. Republican members of the committee submitted questions to Chopra March 31 and subsequently held a hearing, “The End of Overdraft Fees? Examining the Movement to Eliminate the Fees Costing Consumers Billions” with the Subcommittee on Consumer Protection and Financial Institutions, ACA previously reported.

U.S. Rep. Patrick McHenry, R-N.C., ranking member of the House Financial Services Committee, expressed continued concerns about the CFPB’s assessment of fees following the ANPR on credit card late fees.

“It’s clear Director Chopra is targeting financial institutions that charge fees for services based on his predetermined notion that all fees are ‘exploitive junk fees,’” McHenry said in a news release. “However, limiting the fees that issuers can charge to cover costs and deter bad behavior threatens the safety and soundness of our financial system. This move is another step toward choking off access to credit under the guise of consumer protection, at a time when Democrat policies are making everyday essentials unaffordable.”

Meanwhile, before the House subcommittee on overdraft fees in March, House Financial Services Committee Chair Maxine Waters, D-Calif., showed support for the CFPB’s efforts in her opening remarks.

“With a strong CFPB supporting our efforts by investigating junk fees like these, we now have a growing list of banks finally reducing or eliminating overdraft fees,” Waters said.

Comment Timeline

The ANPR on credit card fees has now been posted in the Federal Register. Here are the options to submit comments, which are due by July 22, 2022:

  • Use Docket No. CFPB-2022-0039 to file comments on the Federal eRulemaking Portal: http://www.regulations.gov. Follow the instructions for submitting comments.
  • Email [email protected] and include Docket No. CFPB-2022- 0039 in the subject line of the message.
  • Mail/Hand Delivery/Courier: Comment Intake—Credit Card Late Fees, Consumer Financial Protection Bureau, 1700 G Street, NW, Washington, D.C. 20552. Please note that due to circumstances associated with the COVID-19 pandemic, the bureau discourages the submission of comments by hand delivery, mail or courier.

ACA is reviewing the ANPR for any impact on the accounts receivable management industry. To connect with a member of ACA’s advocacy team with feedback about the CFPB’s focus on fees email [email protected].

Related Content from ACA International:

ACA Issues Clarifying Comments to CFPB on ARM Industry’s Use of Fees

House Financial Services GOP Concerned About ‘Regulatory Overreach’ in CFPB’s RFI on Fees

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