August 02, 2022

NAFCU responds to CFPB ANPR on credit card late fees and late payments

CFPBNAFCU Vice President of Regulatory Affairs Ann Petros Monday wrote to the CFPB regarding its advanced notice of proposed rulemaking (ANPR) regarding credit card late fees and late payments.    

In the letter, Petros reiterated that credit card late fees are not surprise fees and are fully disclosed to consumers, while also being some of the lowest fees available in the market. She also said that credit unions estimate that the cost of servicing members with late payments “exceeds both the fee assessed to the consumer and the revenue that this fee provides to the credit union.”    

Petros urged the Bureau not to eliminate or reduce the safe harbor fee amounts for credit card late fees. Based on responses from a Regulatory Alert seeking feedback from NAFCU members on the ANPR, Petros noted that limiting late fees could negatively affect communities by tightening credit and increasing industry consolidation. Reducing the safe harbor fee amounts could also potentially result in more expensive products and services to account for this lost revenue, such as increased interest rates for credit products “to account for the additional risk and reduced late fee income.”    

Of note, Petros also mentioned that credit unions offer solutions for members to avoid late fees, including a penalty free grace period, no cost fixed payment arrangements or payment plans, payment deferrals, and case-by-case waivers of late fees for consumers experiencing financial hardship.    

“The CFPB should not require financial institutions to perform an annual cost assessment to set their fees, but instead search for ways to enhance the deterrent effect of these late fees,” wrote Petros. “NAFCU recommends the CFPB adopt changes to its disclosures to make them more adaptable to online and mobile banking platforms to help financial institutions effectively deliver information about their late fee structures on the platforms consumers use most often.    

“The CFPB should also consider structural changes to minimum payment amounts to assist consumers in escaping a cycle of credit card debt,” concluded Petros.   

NAFCU also joined several trade associations on a joint letter to advocate against eliminating or limiting credit card late fees.    

Read the full letter. NAFCU will remain engaged on the issue and keep members aware of any developing actions from the CFPB.