The groups oppose the fee cap for its impact on financial institutions and availability of credit.
10/27/2023 11:30 A.M.
2 minute read
A coalition of groups supporting consumers and economic growth are asking the Biden administration and Consumer Financial Protection Bureau to halt a proposed rule from the bureau to cap credit card late fees.
The CFPB’s proposed rule would update regulations implementing the Credit Card Accountability Responsibility and Disclosure Act of 2009 (CARD Act) and “lower the immunity provision for late fees to $8 for a missed payment as well as end the automatic annual inflation adjustment. The proposed rule would also ban late fee amounts above 25% of the consumer’s required payment,” ACA International previously reported.
Thirty groups submitted a letter to President Joe Biden and CFPB Director Rohit Chopra as well as congressional banking, financial services and small business committees, strongly opposing the bureau’s proposed rule, Fox Business reports.
“At the White House this month, President Biden touted the rule, alleging it would give the most vulnerable Americans among us a much-needed break,” the groups state in the letter (PDF). “This isn’t true. A stricter price cap will harm not only small businesses and the economy at large but also the low-income workers that the administration is intending to help.”
The groups add that consumers will face new fees and higher interest rates from financial institutions offsetting the costs of the cap on credit card late fees proposed by the CFPB, according to the letter.
“What’s more, the regulation may cause smaller lending institutions—like credit unions that heavily rely on fees as a source of revenue—to struggle to sustain their operations, which will reduce the availability of credit and diversity of financial products on the market,” they state.
John Berlau, senior fellow and director of finance policy at the Competitive Enterprise Institute, one of the signatories on the letter, told FOX Business, “Even by the president’s broad definition of ‘junk fees,’ charges for late payments do not fit the bill. There is nothing ‘hidden’ or ‘surprising’ about late fees.”
The CFPB is in the process of considering comments received on the proposed rule to issue an official notice of proposed rulemaking, according to its agenda.
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