CFPB caps credit card late fees at $8

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This week, the Consumer Financial Protection Bureau issued its final rule to drastically reduce the typical late fees charged by big credit card issuers, from an average of $32 down to $8 in most cases. The rule only applies to issuers with over 1 million open accounts, and the CFPB claims it will have no impact on smaller issuers such as credit unions.

According to research from America’s Credit Unions, the proposed rule will negatively impact the ability of credit unions to offer viable credit card programs and manage the risks associated with those programs. In addition, it will increase the costs of credit cards for all cardholding members, not just those that incur late payment fees. Many credit unions say their credit card programs targeted toward those with lower credit scores or thin credit profiles would be the first cut, tightening credit availability. Further, the CFPB’s own research shows that 74% of Americans pay their bills on time, so there is no need to penalize those who follow the rules.

Additional background:

• Credit card late fees are not “surprise” or “junk” fees; CFPB requires the credit union’s fees to be clearly detailed up front for consumers. By signing a credit card agreement, consumers know the costs if their payments are tardy.
• The CFPB has repeatedly classified a broad range of ordinary fees in the consumer financial services market as so-called “junk fees” obscuring the true cost of financial services.

“It’s disheartening to see another CFPB overreach that dips straight into the pockets of everyday Americans, who will pay a larger price for this consequential ruling out of their own wallets,” said Cornerstone League EVP/Chief Advocacy Officer Jim Phelps. “With our system partners, Cornerstone League will pull out all the stops to reverse this rule and restore balance to the marketplace.”

America’s Credit Unions Transition Board of Directors Secretary Karen Harbin (president/CEO of CommonWealth Credit Union) is set to testify today on CFPB reforms and the impact of the CFPB’s efforts on credit unions before the House Financial Services Subcommittee on Financial Institutions and Monetary Policy.