Challenge to credit card late fee rule introduced in Senate

An ICBA-backed resolution to nullify the Consumer Financial Protection Bureau’s final rule to cut credit card late fees was introduced in the Senate.

Details: The resolution from Sen. Tim Scott (R-S.C.) would express congressional disapproval of the rule and nullify its implementation. Rep. Andy Barr (R-Ky.) recently introduced a companion version of the bill in the House.

ICBA Letter: In a letter to Scott, ICBA said the rule, which includes an exemption for community banks, could result in consumers making more late payments and incurring additional interest charges that would harm them in the long term.

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.

ICBA Response: In a national news release after the rule’s 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.