Newsroom
CFPB announces review of credit card late fees collected by FIs
The CFPB Wednesday announced an Advance Notice of Proposed Rulemaking (ANPR) in an effort to sharply reduce the $12 billion in late credit card fees that financial institutions, including credit unions, collect each year.
“Credit card late fees are big revenue generators for card issuers. We want to know how the card issuers determine these fees and whether existing rules are undermining the reforms enacted by Congress over a decade ago,” said CFPB Director Rohit Chopra. “This effort is particularly timely since current rules might give companies the incentive to impose big hikes based on inflation.”
Because the Consumer Financial Protection Act transferred authority to adjust late fee provisions from the Federal Reserve to the CFPB, the bureau will now review the Federal Reserve’s immunity provision in the Credit Card Accountability Responsibility and Disclosure (CARD) Act and determine whether adjustments are needed to address late fees.
NAFCU recently wrote a letter to the CFPB submitting feedback to their request for information (RFI) on transparency around junk fees, which mentioned that the bureau’s mischaracterization of fees in financial services as “junk fees,” “excessive or exploitative fees,” or “inflated or surprise fees,” confuses consumers. In addition, the letter urged the bureau to conduct further analysis on the markets and products listed in the RFI before taking any supervisory or regulatory action.
In the letter, NAFCU also noted that the CARD Act limits the amount of initial fees that can be charged during the first year after an account is opened, specifically the amounts of penalty fees, including late fees, as well as the conditions under which the fees could be imposed. “Given these limits, late fees are reasonable, serve as a deterrent to consumers routinely missing their payment due dates, and help cover the collection costs to follow up with members,” wrote NAFCU Vice President of Regulatory Affairs Ann Petros.
Additionally, NAFCU and other trade groups jointly weighed in on the issue, stating that “The CFPB is charged with ensuring that ‘consumers are provided with timely and understandable information to make responsible decisions about financial transactions. If the CFPB now asserts that its past rulemaking efforts have failed to achieve that objective, it must square that assertion with the actual evidence, much of which is already available to the CFPB.
“If, based on such evidence, the CFPB determines that policy intervention may be warranted, it should proceed in a fair and impartial manner, grounded in its authority, and in coordination with other relevant agencies,” the group concluded.
Yesterday’s ANPR asks card issuers, consumer groups, and the public to comment on the following questions:
- How do credit card issuers set late fee amounts? How is the fee determined to be considered reasonable or proportionate or at least related to the actual costs to the card issuer? How is the fee related to the statement balance?;
- Are revenue goals a factor in determining late fees? How do they figure into profitability for the card issuers?;
- What are card issuers’ costs and losses associated with late payments?;
- Do late fees have a deterrent effect? Does the amount have a deterrent effect? Do card issuers impose other consequences other than late fees when payments are late?;
- What methods are card issuers using to encourage timely payments, including autopay and notifications?;
- How many calendar days after the due date do consumers make the late payment? For example, what percentage of accounts is less than 24 hours late versus 30 days late?; and
- For card issuers, what annual income is coming from interest and fees? What are annual expenses?
The association will remain engaged on the issue and keep members aware of any developing actions from the CFPB.
Share This
Related Resources
Add to Calendar 2024-04-25 14:00:00 2024-04-25 14:00:00 Unifying Two Different Executive Benefits Programs About the Webinar In part one we discussed how to retain key positions during a time of transition. In part two, we will look at how to combine executive benefits programs from two different organizations into a single high-performing program. Evaluating each program includes many different facets, from strategy and expense to performance and servicing. This session will provide important considerations, whether or not you have pending M&A activity. Key Takeaways: Is the plan design both retentive and efficient? Is the benefit expense properly mitigated? Does the legal agreement reflect the board’s intent? View On-Demand Web NAFCU digital@nafcu.org America/New_York public
Unifying Two Different Executive Benefits Programs
preferred partner
Gallagher
Webinar
Add to Calendar 2024-04-25 14:00:00 2024-04-25 14:00:00 ChatGPT: What AI can do for you! ChatGPT has been created with one main objective – to predict the next word in a sentence, based on what's typically happened in the gigabytes of text data that it's been trained on. Did you ever hear of the saying, “People fear the unknown?” Artificial intelligence scares people, but it is the future, and you need to understand the tools and resources it offers. It’s also about saving time, that’s what technology and in this case, artificial intelligence can do for you. If you want to save time and have a better quality of life, this training is for you. Once you give ChatGPT a question or prompt, it passes through the AI model and the chatbot produces a response based on the information you've given and how that fits into its vast amount of training data. It's during this training that ChatGPT has learned what word, or sequence of words, typically follows the last one in a given context. During this webinar, ChatGPT: What AI can do for you, you’ll discover the background, purpose, usability, and the pros and cons. Don't miss this opportunity! Key Takeaways Learn the background of AI Understand the purpose of AI Identify the pros and cons Register Now $295 Members | $395 Nonmembers(Additional $50 for USB)One registration gives your entire team access to the live webinar and on-demand recording until April 25, 2025Go to the Online Training Center to access the webinar after purchase » Who Should Attend NCRMs Risk titles Education Credits NCRMs will recieve 1.0 CEUs for participating in this webinar Web NAFCU digital@nafcu.org America/New_York public
ChatGPT: What AI can do for you!
Credits: NCRM
Webinar
Add to Calendar 2024-04-24 14:00:00 2024-04-24 14:00:00 Optimize Liquidity, Maximize Loan Growth: The Network Lending Advantage About The Webinar Join us to learn more about network lending, a cooperative model allowing credit unions to optimize liquidity and achieve loan growth. Discover how credit unions can participate in loan pools with other institutions, allowing them to diversify portfolios, access loans with potentially lower risk and higher yields, and expand lending capacity without necessarily needing a surge in deposits. Delve into how credit unions can pool their resources, set common underwriting and pricing standards, and collectively originate, buy, and sell loans to optimize liquidity management. Hear from your peers about best practices, case studies, and practical strategies to harness the full potential of network lending and how it's helped their credit unions. Don't miss this valuable opportunity to learn how to strengthen your credit union's position in today’s competitive environment. Key Takeaways: How network lending differs from traditional lending The benefits of participating in loan pools with other credit unions How credit unions can set common underwriting and pricing standards and collectively originate, buy and sell loans to optimize liquidity management Why network lending is critical to loan growth Watch On-Demand Web NAFCU digital@nafcu.org America/New_York public
Optimize Liquidity, Maximize Loan Growth: The Network Lending Advantage
preferred partner
LendKey
Webinar
Add to Calendar 2024-04-23 14:00:00 2024-04-23 14:00:00 Monitoring the Latest Litigation Risks Credit unions’ operations pose litigation risks, with more of these cases being filed as class action lawsuits. In this Monitoring the Latest Litigation Risks for Credit Unions webinar, you’ll review some of the specific kinds of lawsuits impacting credit unions and what potential claims could be on the horizon. You’ll also examine some options for mitigating risks. Key Takeaways Review the current lawsuit trends. Understand the potential claims risks Explore options for mitigating risks. Register Now $295 Members | $395 Nonmembers(Additional $50 for USB)One registration gives your entire team access to the live webinar and on-demand recording until April 23, 2025Go to the Online Training Center to access the webinar after purchase » Who Should Attend NCCOs NCRMs Compliance and risk titles Education Credits NCRMs will recieve 1.0 CEUs for participating in this webinar NCCOs will recieve 1.0 CEUs for participating in this webinar Web NAFCU digital@nafcu.org America/New_York public
Monitoring the Latest Litigation Risks
Credits: NCCO, NCRM
Webinar
Get daily updates.
Subscribe to NAFCU today.