CFPB Publishes ANPR on Credit Card Late Fees

The Consumer Financial Protection Bureau yesterday took its first step toward cracking down on credit card late fees, issuing an Advanced Notice of Proposed Rulemaking (ANPR) that seeks information on how effective the $12 billion that consumers pay in late fees every year are as a deterrent and how much they add to the credit card companies’ bottom lines.

Earlier this year, the CFPB announced it was looking into what it called “junk” fees paid by consumers related to their credit cards, such as late fees, over-balance fees, and other fees charged by credit card companies, financial services institutions, and consumer finance companies.

Now, the CFPB has begun the rulemaking process, and although it did not put a timeline on issuing a proposed rule or final rule, it does appear that the Bureau is going to move faster than it did in issuing its debt collection rule.

Among the questions posed by the CFPB yesterday are:

  • How do credit card issuers set late fee amounts? How is the fee determined to be considered reasonable or proportionate or at least related to the actual costs to the card issuer? How is the fee related to the statement balance?
  • Are revenue goals a factor in determining late fees? How do they figure into profitability for the card issuers?
  • What are card issuers’ costs and losses associated with late payments?
  • Do late fees have a deterrent effect? Does the amount have a deterrent effect? Do card issuers impose other consequences other than late fees when payments are late?
  • What methods are card issuers using to encourage timely payments, including autopay and notifications?
  • How many calendar days after the due date do consumers make the late payment? For example, what percentage of accounts is less than 24 hours late versus 30 days late?
  • For card issuers, what annual income is coming from interest and fees? What are annual expenses?

The public can submit its comments on the ANPR before July 22.

In comments made about the ANPR, Rohit Chopra, the CFPB’s Director, noted that individuals who do not pay their credit card bills on time are already penalized by having to pay interest on their debts. Late fees, Chopra said, “seem like a second penalty for the same event.” Does it seem to anyone else that the CFPB may have already made up its mind about what it plans to do?

Credit card late fees are becoming a more popular topic because rising inflation and a stagnating economy are making it harder for consumers to pay their bills. More consumers missing payments means more late fees are on the horizon.

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