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New Monitor highlights consequences of credit card late fees proposal
NAFCU's latest Economic & CU Monitor – now available for download – reveals that the CFPB’s proposal to drastically reduce the credit card late fee safe harbor to $8 would have far-reaching consequences, including that 76 percent of respondents would be forced to charge a higher interest rate on credit cards.
In addition, other types of interventions might be necessary to adapt to the CFPB’s proposal:
- 63 percent said they would adjust rewards offered;
- 61 percent said they might have to limit extension of credit to at-risk borrowers; and
- 59 percent said they would readjust underwriting standards.
Survey respondents highlighted that current credit card fees support a number of programs, including rewards (67 percent), subsidizing the cost of credit offered to at-risk borrowers (56 percent), no fee checking and savings products (53 percent), and financial literacy (44 percent).
The Monitor survey also provides insights into the minimum credit card late fee needed to break even on a credit card portfolio, the average annual fee collected per account, and monthly pre-charge off collection costs per account.
NAFCU has fought to set the record straight against the CFPB’s misleading efforts to categorize credit card late fees as “surprise” or “junk” fees, noting that they are clearly disclosed to consumers upfront.
Credit unions are encouraged to share statements of opposition with NAFCU to amplify credit union concerns with the proposal, demonstrating how consumers and small financial institutions will be negatively impacted if finalized.
This month’s Economic & CU Monitor also offers an update on recent bank failures, the Federal Open Market Committee’s decision to hike rates, credit unions’ fourth quarter call report data, and other economic trends.
NAFCU relies on survey responses to provide its members a glimpse of trends affecting the credit union industry and inform the association’s advocacy efforts. Next month’s Economic & CU Monitor survey is focused on small business lending; responses to the survey are due April 12.
For more on NAFCU's award-winning research team, check out the association's Macro Data Flash reports for insights into interest rates, auto sales, the housing market, and more.