CFPB Finalizes Rule to Increase Costs for Responsible Consumers that Pay Bills on Time

Washington, D.C. — The Consumer Financial Protection Bureau finalized a regulation today that will impose arbitrary new limits on the amount that banks can charge for credit card late payments. The final rule reduces the existing limit — the “safe harbor” — to $8 from its current levels of $30 for the first violation and $41 for subsequent violations without justification or adequate data to support the change — data gaps that the CFPB acknowledged but failed to address.

What BPI is saying:

BPI President and CEO Greg Baer issued the following statement in response:

Today’s announcement is a prime example of how the CFPB has been politicized, and how its regulatory actions promote rhetoric over analysis and data, and perceived short-term political gain over the long-term benefits of consumers. As the CFPB guts an important risk management tool using junk economic analysis, all consumers who pay on time will now pay more, and low- and moderate-income borrowers who pose greater risk will lose some access to credit. Given the rule’s multiple deficiencies and shortcomings, its fate is likely to be resolved in federal court.

Five major problems with the rule:

  1. It harms consumers. Lower late fees will likely cause more consumers to pay late, which risks damaging their credit score and shifts higher costs to consumers who pay on time in the form of annual fees and higher APRs.
  2. It isn’t supported by data. The CFPB failed to publish comprehensive data, analysis or the methodology that led to the rule; the data that was provided is deficient.
  3. It violates the law. This deficient analysis violates the law — reasoned analysis and evidentiary support for rule changes are required by the Administrative Procedure Act.
  4. It disregards congressional intent. The rule portrays fees as inherently bad without acknowledging the important role they play in encouraging responsible financial behaviors and enabling banks to offer maximum benefits at the lowest cost — a statutory requirement outlined in the Card Accountability Responsibility and Disclosure (CARD) Act.
  5. It prioritizes politics over policy. The rule carves out small issuers and only applies the revised regulations to institutions with over one million open accounts. If the CFPB genuinely believed these actions were good policy, it wouldn’t introduce a two-tiered price system, enabling the CFPB’s preferred market segment to maintain the status quo.

What’s the background?

The CARD Act of 2009, a signature achievement of the Obama Administration, increased transparency for borrowers by addressing disclosures and limiting penalty fees to those that are “reasonable and proportional.” When enacting the rule applicable to late fees, regulators determined that a safe harbor, or maximum amount that could be charged, would be more feasible and cost-effective than trying to determine what was reasonable and proportional for each card.

The law was widely heralded as a success, including by the CFPB itself under leadership from both political parties for over a decade, until the CFPB made an about-face and initiated its rulemaking in 2022.

Learn more and get the Facts on Fees through the following resources:

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About Bank Policy Institute

The Bank Policy Institute (BPI) is a nonpartisan public policy, research and advocacy group, representing the nation’s leading banks and their customers. Our members include universal banks, regional banks and the major foreign banks doing business in the United States. Collectively, they employ almost 2 million Americans, make nearly half of the nation’s small business loans, and are an engine for financial innovation and economic growth.

Media Contact

Austin Anton
Bank Policy Institute
austin.anton@bpi.com

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