The Consumer Financial Protection Bureau’s (CFPB) final rule
to cap credit card late fees that financial institutions may charge consumers
has met with significant pushback from the financial industry.
The final rule cuts the safe harbor on credit card late
fees, defined by the Credit Card Accountability Responsibility and Disclosure (CARD)
Act, from $30 for an initial violation and $41 for subsequent infractions to $8
and eliminates inflation adjustments that have allowed institutions to increase
late fees over time.
Although the bureau has said the rule specifically targets
large credit issuers – those with one million or more open accounts trade
groups representing community banks and credit unions have expressed opposition
to the measure, alongside larger institutions. Limiting the measure’s
applicability to only large credit providers allows the CFPB to avoid
analyzing the rule under the Small Business Regulatory Enforcement Fairness
Act.
Some have noted their support for legislation introduced in
the House and Senate expressing congressional disapproval of the rule and
nullifying its implementation. Learn about these views and more in this roundup
of takeaways from industry trade groups.
Multiple trade groups support nullifying credit card fee
rule
Five trade associations representing financial institutions
sent a joint letter to Sen. Tim Scott (R-S.C.) and Rep. Andy Barr (R-Ky.) expressing
support for their legislative proposals aimed at preventing the CFPB’s final
rule on credit card late fees from taking effect. The letter was endorsed by
the American Bankers Association, America’s Credit Unions, the Bank Policy
Institute, the Consumer Bankers Association, and the Independent Community
Bankers of America(ICBA). The trades made the following points, among others,
in their letter:
“Credit card late fees are not ‘junk fees.’ U.S. banking
fees are some of the most highly regulated and transparent in the world. Credit
card late fees are prescribed under Regulation Z, which implements the Truth in
Lending Act (TILA). As has been required by law for many years, these fees are
clearly disclosed to the consumer upfront. In addition to having clear and
required disclosures, credit card penalty late fees serve an important,
pro-consumer purpose recognized by TILA: to deter consumers from paying late on
their credit card bills which has long-term impacts on consumers’ financial
health. Nevertheless, President Biden chose to highlight the rule in his two
most recent State of the Union Addresses, underscoring the political nature of
the rule.
“Remarkably, notwithstanding that the proposed rule would
not even be published in the Federal Register for another eight weeks, the
President announced where the CFPB’s proposed rule would land just six days
after it was released, before any comments had been filed or considered: ‘We’re
cutting credit card late fees by 75 percent, from $30 to $8.’ This degree of
political coordination between the CFPB and the White House suggests the CFPB
prejudged this rulemaking and calls the rulemaking’s integrity into question.
Further, the CFPB appears to have rushed to judgment throughout various
important steps in the rulemaking process, raising additional concerns about
improper prejudgment. Based on public statements by the administration and the
CFPB, it appears that the CFPB was unwilling to alter course based on industry
feedback to help protect consumers.”
The trades have been consistently vocal
about their shared concerns about measures aimed at putting restrictions on
credit card issuers.
ICBA president, CEO comments on CFPB credit card rule
In a separate statement from the joint comment letter, ICBA
President and CEO Rebeca Romero Rainey released a statement regarding her
organization’s views on the CFPB’s rule placing a cap on credit card late
fees:
“While ICBA and the nation’s community banks are encouraged
that the CFPB’s final rule on credit card fees for late payments exempts
community banks due to their relationship-based business model, we remain
concerned about the unintended consequences of the rule.
“The CFPB’s rule sends the wrong message that punctual
credit card payments are not a significant priority, which could result in
consumers making more late payments and incurring additional interest charges
that would harm them in the long term. Credit card late fees — which are
clearly disclosed — deter late payments and help offset the significant costs
of collection for issuers. Generally, late fees are used by businesses — and by
federal and state governments — to encourage timely payment.
“Further, while we generally oppose regulatory efforts to
regulate the free market and set prices that interfere with competition and
consumer choice, relationship-based community banks offer credit cards as a
service to their customers under contracts voluntarily entered into by these
consumers and are rightly not targeted by today’s rulemaking.”
MBA president, CEO weighs in on VA servicing purchasing
program
Mortgage Bankers Association (MBA) President and CEO Bob
Broeksmit recently issued the following statement on the Department of Veterans
Affairs’ (VA) release of its Veterans Affairs Servicing Purchase (VASP)
program:
“MBA welcomes the release of the VASP program as a new home
retention option that will allow mortgage servicers to help more distressed veteran
borrowers stay in their homes via a more affordable and sustainable mortgage
payment. This is especially important in the current high interest rate
environment.
“Servicers have performed extraordinarily since the pandemic
to implement new forbearance and home retention programs from the VA and other
federal agencies, helping more than 8 million families stay in their homes.
While the VA has announced a May 31 effective date, it is important for veterans
to understand that the VA has assured servicers that additional time will be
provided to implement this complex and novel program. Servicers will work
diligently to modify their systems and operations and train their staffs to
implement the program by the VA’s deadline, when announced.
“The VA should also develop a permanent partial claim option
as its preferred home retention solution, in addition to VASP. The partial
claim worked successfully for borrowers and servicers during the pandemic and
is a crucial loss mitigation tool that exists for every other government loan
program. Having both a partial claim option and VASP would provide servicers a
durable loss mitigation framework to help struggling homeowners avoid
foreclosure in any market environment.”