CFPB targets credit card late fees in ‘junk fee’ effort

The Consumer Financial Protection Bureau said credit card issuers charged $12 billion in late fees in 2020 and that many have made these penalties “a core part of their profit model.”

Details: The CFPB—which is reporting on late-payment fees as part of its initiative targeting “junk fees”—also said:

• It expects credit card issuers to hike fees due to inflation.

• Many major issuers charge the maximum late fee allowed under immunity provisions set by the Federal Reserve Board in 2010.

• Subprime and private-label cards are particularly susceptible to late fee charges.

• Late fee volume fell when stimulus checks arrived in 2020 and 2021, particularly for households with lower credit scores.

• Low-income areas, areas with high shares of Black Americans, and areas with lower economic mobility are disproportionately affected.

Comment Period: The CFPB recently extended until April 11 the deadline to comment on "exploitive junk fees" charged by financial institutions.

ICBA Response: ICBA has called the request for information a "misguided effort that paints a distorted and misleading picture” of the industry while reiterating that community banks already follow multiple federal laws and the CFPB's own rules requiring them to clearly disclose terms and fees.