Comments due on proposed CFPB credit card late charge rule
The CFPB on February 1, 2023, announced a proposed rule that would limit credit card late fees. Based on the CFPB’s estimates, the proposal could reduce late fees by as much as $9 billion per year.
The Bureau said late fees may not be needed to deter late payments, nor be justified based on the consumer’s conduct in paying late. Late fees also may be on top of other consequences of paying late, such as a lost grace period on paying interest or a lower credit score, depending on how long the missed payment lasts.
The CFPB’s proposed changes would, if finalized:
- Lower the immunity provision dollar amount for late fees to $8: The CFPB believes that a late fee of $8 would be sufficient for most issuers to cover collection costs incurred as a result of late payments. The $8 immunity provision would apply to any missed payment. Companies would be able to charge above the immunity provision so long as they could prove the higher fee is necessary to cover their incurred collection costs.
- End the automatic annual inflation adjustment: The CFPB would instead monitor market conditions and the immunity provision amount for potential adjustments as necessary.
- Cap late fees at 25% of the required minimum payment: The CFPB proposes to restrict any late fee charge to 25% of the minimum payment to be more consistent with Congress’s intent to authorize only reasonable and proportional late fee amounts.
The proposal also seeks comment on other potential changes to CARD Act regulations. For instance, it requests comment on whether the CFPB’s proposed changes should apply to all credit card penalty fees, whether the immunity provision should be eliminated altogether, whether consumers should be granted a 15-day courtesy period, after the due date, before late fees can be assessed, and whether issuers should be required to offer autopay in order to make use of the immunity provision.
Comments will be accepted through April 3, 2023, or until 30 days after publication of the Notice of Proposed Rulemaking in the Federal Register, whichever is later.