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NAFCU Vice President of Regulatory Affairs Ann Petros called on the CFPB to rescind its proposed rule to reduce the credit card late fees safe harbor, outlining more than 20 pages of concerns about the rule’s “onerous” impact on credit unions and their 135 million members. NAFCU has led the charge against the bureau’s proposal and mischaracterization of “junk fees” in financial services from the start, with NAFCU President and CEO Dan Berger calling for an end to the CFPB’s “war on Main Street.”

In addition, the Small Business Administration’s (SBA) Office of Advocacy submitted a comment letter criticizing the bureau for disregarding its obligation to analyze the rule’s impact on small businesses and dismissing valid concerns raised by small institutions.

NAFCU has consistently shared concerns about how quickly the bureau has moved through this rulemaking process, skipping important required steps such as convening a Small Business Regulatory Enforcement Fairness Act (SBREFA) panel to fully understand how reducing the safe harbor will impact the industry. NAFCU, as well as the SBA, emphasized the proposal may force some credit unions to reevaluate their credit card offerings and lead to smaller credit unions exiting the credit card market altogether.

“This proposed rule will not lead to the Bureau’s intended outcome,” Petros wrote. “Rather, it will reduce competition in the credit card market, as only the largest credit card issuers will be able to absorb the resultant losses. Consequently, this will lead to further consolidation among our nation’s community-based financial institutions and reduced access to credit for consumers.”

The association’s advocacy has spurred legislative efforts to hold the CFPB accountable and grassroots action among member credit unions, generating more than 125 comment letters to the bureau in opposition to the late fees proposal. A recent edition of NAFCU’s Economic & CU Monitor surveyed credit unions on the impact of the reduced fee limit, with 76 percent indicating they’d be forced to charge higher interest rates on credit cards. Respondents also noted they’d have to limit extension of credit to at-risk borrowers, and financial literacy programs would be impacted.

“The proposed changes would not meaningfully reduce consumer indebtedness… it will harm smaller, community-based financial institutions like credit unions and their members who will experience tighter credit standards and reduced access to products and services,” Petros wrote. “…The Bureau should instead further study the market, including taking a closer look at the role of credit card payment processors and newer fintech lenders, before continuing to rush through this rulemaking process.”

Read Petros’ full letter of concerns here.

NAFCU also joined with several other financial services industry trades to submit official comments to the bureau on the proposal, reiterating many of the concerns detailed by Petros and providing data on the proposal’s impact. The groups have called on the bureau to hold a SBREFA panel and extend the comment period numerous times.

The proposed rule would reduce the late fee safe harbor amount to $8 for all violations, from the current levels of $30 for first violations and $41 for subsequent late payments, and end the annual inflation adjustment of the safe harbor amount.

NAFCU will continue to fight back against the CFPB’s misguided efforts that will restrict access to safe, affordable credit and support efforts to hold the bureau accountable.