Signage is seen at the Consumer Financial Protection Bureau headquarters in Washington, DC, on August 29, 2020.
Andrew Kelly | Reuters
WASHINGTON — The Consumer Financial Protection Bureau’s ambitious proposal to crack down on credit card late fees, a $14.5 billion profit for credit card companies, is possible will be released in Januaryalmost a year after it was released.
Global corporations and small banks are pushing the imminent finalization of the rule with help from pro-business lawmakers.
Rep. called. Andy Barr, R-Ky., the proposal, which is expected to save consumers nearly $12 billion a year by limiting late fees for as little as $8, “unclear and probably harmful” for a long time.
The chair of a House subcommittee on financial institutions and fiscal policy called on the Government Accountability Office to study the potential effects of the rule weeks before it is set to take effect.
The CFPB has not confirmed when the rule will be finalized, but interest groups say banks have not yet signaled a preemptive fee change similar to their response to a proposal to ban overdraft and insufficient funds fees.
Late fees, which can reach $41 under a legislative hole which allows banks to charge unhindered under a certain limit, without equal affect poor Americans and those with low credit scores, the American Economic Liberties Project reported.
The US Chamber of Commerce It said the fees “play an important role” in encouraging timely payments and avoiding additional interest on them comments in the proposal.
“Contrary to the CFPB’s baseless claims, late fees are not permitted, so-called ‘junk fees’ that fail to serve any purpose,” the Chamber wrote, referring to the Biden administration’s overall initiative to minimize excessive surcharges. “Instead, they are highly regulated by the CFPB, and the Federal Reserve before it.”
The House submitted one of those 1,000 comments opposing the proposal, in a total of 57,000 comments, according to Accountable.US, a nonpartisan government watchdog group. Another 56,000 comments support the caps.
The $8 fee also does not reflect the costs of collections for credit unions, said Greg Mesack, senior vice president of government affairs at National Association of Federally-Insured Credit Unions, told CNBC. Spent by the organization $1.42 million in lobbying in Q1 of 2023, according to Senate lobbying disclosures.
In this comment against the rule, the association argued that credit unions typically offer their members lower rates for services such as car loans and mortgages compared to big banks.
“We lose a tremendous amount of money every time there’s a catch,” Mesack said. The fee, he added, is not enough of a deterrent, “so more people are likely to be late.”
“Many credit unions have to deal with the consequences of potentially limiting their credit card programs, which at that point makes them uncompetitive with the big banks,” Mesack said.
The CFPB consulted the National Credit Union Administration Board, along with the Comptroller of the Currency and the board of directors of the Federal Deposit Insurance Corporation, when developing the proposal, according to a Notice of Proposed Rulemaking.
Final fees of upwards of $41 “are higher than pre-fee collection costs” cited by an unnamed credit union trade group, according to the NPRM.
Instead, the $8 fee cap reflects the CFPB having “digged in, researched, looked at industry data and come up with a number that they think best reflects a bank’s ability to recover the cost associated with a late payment,” said Shahid Naeem, senior policy analyst at AELP.
“The fact that the CFPB has determined that $8 is enough to cover costs and the banks are charging $41, that’s significant,” said Christine Hines, a legislative director for the National Association of Consumer Advocates. “And it shows that somewhere, there’s conduct that needs to be curbed. Clearly.”
CFPB Director Rohit Chopra told senators last month that banks should support the measure “if it’s not a core part of their revenue model.”
Credit card companies spend a historic $37.04 million in 2022 in lobbying, according to records database Open Secrets. That year, the total outstanding credit card debt was surpassed $1 trillion for the first time since the CFPB began collecting the data.
Companies spent more than $30.7 million in lobbying now in 2023.
“In a sense, these big financial companies, they have so much power, they have so much money and they’re at war with regulation,” Naeem told CNBC.
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