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Biden repeats misleading credit card late fees claim in SOTU
President Joe Biden gave his 2023 State of the Union address Tuesday evening. While much of the speech provided insights into how the administration is working to strengthen the U.S. economy and support workers, Biden also repeated a misleading claim about the CFPB’s credit card late fees proposal.
The proposed rule would cut allowable late fees for credit cards by over 75 percent. However, within the proposal, the bureau acknowledges that the majority of Americans don’t make late payments and wouldn’t see any cost savings, but would carry the brunt of increased costs arising from card issuers having to recoup those costs in other ways.
“President Biden and the CFPB are not giving Americans the full picture of what the credit card late fees proposal will actually mean for their pocketbooks,” said NAFCU President and CEO Dan Berger. “Consumers rely on safe, reliable short-term credit to afford daily life. This rule will severely restrict the market for credit cards, making those products harder to qualify for and increasing the cost of all other financial products and services. For Americans with low credit scores or lower incomes, this rule would cripple their ability to achieve any sense of financial security.”
The CFPB last week unveiled the late fees proposal that would drastically reduce the current safe harbor to $8. In response, Berger said it would create “financial chaos” with several unaddressed, unintended consequences. The association has repeatedly flagged concerns over the rulemaking to the CFPB, including the bureau’s circumvention of the law by not convening a panel under the Small Business Regulatory Enforcement Fairness Act (SBREFA) to consider the impact of the rule on small entities.
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.