CFPB finalizes rule on credit card late fees with community bank exemption

ICBA said it remains concerned about the unintended consequences of a newly released Consumer Financial Protection Bureau final rule to cut credit card late fees despite an exemption for the nation’s community banks.

Rule Details: The CFPB rule:

• Cuts the credit card late fee safe harbor under the CARD Act from the current levels of $30 for the first violation and $41 for subsequent violations to $8, without inflation adjustments.

• Applies to issuers with 1 million or more open accounts, which allows the CFPB to avoid analyzing the rule under the Small Business Regulatory Enforcement Fairness Act.

• Allows covered issuers to charge fees above the threshold as long as they can prove the higher fee is necessary to cover their collection costs.

• Is scheduled to take effect 60 days after publication in the Federal Register.

ICBA Response: In a national news release, ICBA said the rule sends the wrong message that punctual credit card payments are not a significant priority, which will harm consumers by leading to more late payments and additional interest charges. “Generally, late fees are used by businesses — and by federal and state governments — to encourage timely payment,” ICBA President and CEO Rebeca Romero Rainey said.

Congressional Challenge: Senate Banking Committee Ranking Member Tim Scott (R-S.C.) said he would fight the CFPB rule and its implementation via the Congressional Review Act, which allows Congress to overturn certain federal agency actions. Scott said the rule would decrease the availability of credit card products, raise rates for many borrowers, and increase the likelihood of late payments.

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