President’s Late Fee Rhetoric Prioritizes Politics and Junk Economics Over Good Policy

Washington, D.C. — President Joe Biden pointed to efforts to curb consumer fees, such as travel and online ticket seller fees that are often compulsory and undisclosed, in his annual State of the Union address. Credit card late fees were unfairly grouped with these other fees, even though consumers have a choice on whether to pay late and banks are legally required to disclose all credit card fees upfront. The President’s comments on credit card late fees refer to a recently finalized rule by the Consumer Financial Protection Bureau.

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

The President’s remarks on credit card late fees are political rhetoric masquerading as public policy. Government imposes late fees on all sorts of activities — parking tickets and tax payments to name a few. The Administration’s policy is divorced from data and relies on junk economics to shift the costs from those who pay late to everyone else in the form of annual fees and higher APRs. The justification that the substantial reduction in credit card late fees is good for America rings hollow because the changes only apply to the largest credit card issuers and carve out small issuers for political expediency.

The CFPB rule substantially reduces the limit, referred to as the “safe harbor,” that the largest banks can charge for credit card late fees. Congress recognized that credit card late fees serve an important deterrent purpose in the Card Accountability Responsibility and Disclosure Act of 2009, a major accomplishment of the Obama-Biden Administration pursuant to which the CFPB has issued the new limitation. Furthermore, banks’ legal requirements to disclose fees are governed by the following regulations:

  • TILA/Reg Z (credit card fees)
  • Truth in Savings Act/Reg DD (deposit account fees)
  • EFTA/Reg E (electronic fund transfer fees)
  • TILA/RESPA (mortgage origination and settlement service fees)

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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.

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