ABA, trade groups: CFPB must seek small bank input on credit card fee rule

The Consumer Financial Protection Bureau is required by law to seek input from community banks and credit unions with assets of than $850 million or less before moving forward with rulemaking on credit card penalty fees, given the proposal would have a significant economic effect on a substantial number of small financial institutions, ABA and four industry associations reiterated today in a letter to the agency. The groups previously raised the issue in an August 2022 letter, noting the Small Business Regulatory Enforcement Fairness Act requires the CFPB to seek input early in the rulemaking process from small banks likely to be affected by new regulation.

The CFPB last year issued an advance notice of proposed rulemaking to review credit card fees charged by financial institutions, which Director Rohit Chopra has often derided as “junk fees.” More recently, the agency announced plans to issue a proposed rulemaking on the fees later this month. In their letter, the groups said that contrary to what is required by SBREFA, the agency has yet to convene a panel of small entity representatives, or “SERs,” to offer feedback on the proposals being considered and to suggest less burdensome alternatives.

“Under SBREFA, the CFPB must convene and chair a small business review panel if it is considering a proposed rule that could have a significant economic impact on a substantial number of small entities… Specifically, the panel is required to collect advice and recommendations from small entities or their representatives that are likely to be subject to the regulation that the CFPB is considering proposing,” the associations said.

The groups noted that of the 805 credit card-issuing banks in the U.S., more than half have assets of less than $850 million. Reducing the amount issuers may charge for late payments would potentially have significant adverse effects on all issuers and cause them to alter their business models, they said. “Any regulatory change to late fees would ultimately impact the entire card market and bring with it the potential to change the competitive position of small depository institutions in ways that must be explored through the SBREFA process.”

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