U.S. Sen. Elizabeth Warren (D-Mass.) sent a letter to Consumer Financial Protection Bureau (CFPB) Director Rohit Chopra highlighting findings from a recent investigation into the late fee practices of the 10 largest credit card issuers and urging the CFPB to finalize its proposed rule regarding those fees.
In February, the CFPB proposed a new rule that would require credit card issuers to justify late fees in excess of $8, terminate automatic annual inflation adjustments to late fees, and cap late fees at 25 percent of the required minimum payment. According to Warren, such new requirements would save American families up to $9 billion a year.
“This proposed rule is necessary to protect American consumers from the predatory practices of greedy financial institutions and furthers the Biden administration’s efforts to root out junk fees,” she wrote in her letter to Chopra.
In May, Warren, along with Sens. Sherrod Brown (D-Ohio), chair of the Senate Banking, Housing, and Urban Affairs Committee, Jack Reed (D-R.I.), Richard Blumenthal (D-Conn.), Tammy Baldwin (D-Wis.), Peter Welch (D-Vt.), and Bernie Sanders (I-Vt.), sent a letter to 10 of the largest credit card issuers – PNC, JPMorgan Chase, Capital One, Citigroup, Discover, Bank of America, American Express, Wells Fargo, US Bancorp, and USAA – requesting information on their credit card late fee practices.
“The respondents repeatedly revealed their interest in maintaining exorbitant late fees as tools of punishment, arguing that late fees must be maintained at an ‘effective deterrent level’ and that ‘fees encourage timely payment’ while providing no evidence to suggest that excessive $41 fees are necessary to deter late payments,” she wrote. “None of the issuers provided data we requested to substantiate their claims that the costs associated with collecting late payments exceeds the total late fees collected.”
Warren offered support for the CFPB’s effort and urged Chopra to “finalize the proposed rule without making any changes that weaken it.”