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Berger: CFPB’s credit card late fee proposal ‘amounts to financial chaos’
The CFPB Wednesday issued its proposed rule on credit card late fees that would drastically reduce the current safe harbor to $8. NAFCU President and CEO Dan Berger responded, arguing that the proposal “on its face may be about saving consumers money, but it amounts to financial chaos – ultimately sacrificing access to safe, affordable credit for millions of Americans who rely on it to afford daily life.”
“Cutting protections for credit card providers will price smaller, community-based financial institutions like credit unions out of the market,” Berger added. “With this rulemaking, the bureau is ignoring its statutory mandated safeguard to protect small institutions and NAFCU’s call to follow the law by conducting a SBREFA panel to analyze its impact. The consumers credit unions serve, many in low-income and underserved populations, will have reduced access to credit as a result.
“In addition, institutions will likely be forced to raise the price of checking and savings accounts or other loan products and reduce the benefits of other financial programs. This proposed rule, if finalized in its current form, will hit Americans hard.”
NAFCU has flagged the potential consequences of this rulemaking, including limiting credit availability and increasing industry consolidation, and noted that credit unions offer several solutions to members experiencing financial hardship. The association has also raised issue with the bureau not convening a panel under the Small Business Regulatory Enforcement Fairness Act (SBREFA) to consider the impact of the rule on small entities.
In addition to limiting the safe harbor dollar amount for late fees to $8, even for subsequent violations, the proposed rule also:
- prohibits annual inflation adjustments to the late fee safe harbor amount; and
- caps late fees at 25 percent of the required payment.
NAFCU will continue its strong advocacy against this proposed rule and urge the CFPB to convene a SBREFA panel to ensure credit unions and their members do not lose access to safe, affordable credit options.