In February 2023, the Consumer Financial Protection Bureau (CFPB) proposed amending Reg Z to slash the maximum allowable late fees on credit card accounts to $8.
Alleging these so-called “junk fees” to be detrimental to American consumers, the Bureau and Biden administration are pushing to not only limit the maximum allowable late fee but also limit fees to no more than 25 percent of an account’s required minimum payment.
Since the announcement, the financial system has fired back claiming the proposed amendments would severely hamper financial institutions.
CUNA recently filed a comment letter to the CFPB detailing many of the possible economic ramifications of said action, as well as stressing credit unions’ role in providing valuable services to the benefit of the member-owners: “…credit unions’ interest in their members’ financial well-being and advancing the communities they serve takes on a paramount importance. We often find that even well-intentioned policies can have the unintended consequence of making credit union services less available and more expensive to those who need them the most.
Chopra and CFPB were also accused in the letter of misrepresenting fees by referring to them as junk fees, alleging the move to be a “convenient public relations tactic intended to divert the public’s attention away from the ever-increasing cost of everyday goods and services arising out of an environment of high inflation and other economic pressures.”
In perhaps its most critical remark, CUNA wrote “We can only surmise the entire ‘junk fee initiative’ is purposefully intended to be provocative merely to score political points rather than begin a legitimate discussion of the purpose of fees and the efficacy of disclosures.”
The National Consumers Law Center, on behalf of its clients, wrote that the CFPB had “showed its math.” A task they asserted issuers had not done in turn. But CUNA claims that the comment period was not only insufficiently short to conduct adequate data collection and research but that the ten-day extension the CFPB granted after the request was indicative of a Bureau acting in bad faith.
As the letter concludes, CUNA dives into the data in explaining late fees as a necessary tool in mitigating risk, urging the CFPB to table the proposal until additional research can be done on the ramifications to credit unions and the entire financial system, and failing that, giving institutions an extended window to adopt the changes.
CUNA also attached a copy of an economic analysis of the CFPB’s proposed rule by Stephen Bronars, a Partner with Edgeworth Economics LLC., a consulting firm specializing in economic and statistical analysis. The full letter and economic analysis are available from CUNA’s website.