CFPB Director Rohit Chopra today announced an advance notice of proposed rulemaking focusing on credit card late fees. The ANPR reopens a rule that the Federal Reserve Board enacted in 2010 that provides banks with a safe harbor on the amount they can charge when a cardholder pays late and which provided for annual adjustments based on inflation. In remarks today that suggested that he views current fees as “excessive,” Chopra indicated that CFPB would scrutinize how banks that rely on that safe harbor set their fees and how banks are immunized from enforcement when following the government’s rule. This review could potentially lead to a revision in Regulation Z, which implements the CARD Act and Truth in Lending Act.
Under the CARD Act, credit card late fees must be “reasonable and proportional” to the costs incurred by the issuer as a result of a late payment, unless the bank instead relied on a safe harbor limit set by regulators. In 2010, the Federal Reserve approved implementing regulations for the CARD Act that set fees at $30 for a late payment and $41 for each subsequent late payment within the next six billing cycles, subject to an annual inflation adjustment. In the years since, CFPB has adjusted the safe harbor amount based on annual changes in the weighted Consumer Price Index.
Today’s ANPR focuses in particular on the 2010 rule, and the CFPB signaled that it intends to “determine whether adjustments are needed to address late fees.” Comments on the proposal are due July 22.
The American Bankers Association panned this action by the bureau, noting that consistent with the CFPB’s “misguided public relations campaign against so-called ‘junk fees,’ today’s CFPB action attempts to sensationalize a standard, highly regulated fee, creating the false impression that credit card issuers are pushing the bounds of the law.” ABA emphasized that late fees have already been capped by federal regulation, and that banks issuing credit cards are routinely supervised for compliance. “Today, despite that regulatory reality, Director Chopra has declared these fees ‘excessive,’ suggesting he has already made up his mind before the rulemaking process even begins,” the association said.