ARLINGTON, Va.–NAFCU said it is continuing to monitor this week a much watched-for proposal from the CFPB on credit card late fees.
As CUToday.info reported, last week the Bureau released a request for information on its Card Act review of the market.
“But at any point now it may drop its highly anticipated proposed rule on credit card late fees,” said Ann Petros, VP-regulatory affairs with NAFCU, noting the association joined with CUNA and the Defense Credit Union Council in filing a comment letter that, among other things, outlined how the groups believe the Bureau should move forward with any rulemaking. “What we think the CFPB may do is either completely eliminate the safe harbor for late fees or significantly reduce that safe harbor for late fees potentially to about half of what it is right now, and cut the automatic inflation adjustment.
No ’Surprises’ From CUs
“From our perspective credit card late fees are not at all surprise fees for consumers; they are clearly and conspicuously disclosed to consumers up front,” continued Petros. “Credit unions, in fact, offer some of the lowest late fees available in the market. Our members work hard to keep these fees as low as possible. even offering a fixed fee, meaning that the amount doesn't increase for subsequent late fees, even though it is permissible under the safe harbor. Sometimes, these fees are outside of the control of a credit union because they are set by a third-party financial institution partner. Our members have estimated the cost of servicing members with late payments not only exceeds the fee assessed to the consumer, but also the revenue that this fee provides to the credit union. In other words they are expending a lot more than they are receiving from this late fee, so it is not a huge revenue generator. That is not the purpose of these fees.”
Petros also outlined other “resources and outreach” she said credit unions offer to help member avoid late fees.
Not ‘Appropriate’
“We don't believe that it is appropriate for the CFPB to reduce the current safe harbor fee amounts and they should continue to adjust them with the CPI,” said Petros. “We think the CFPB should focus on those bad actors who are taking advantage of consumers’ mistakes and charging excessive fees. The CFPB should focus on repeat offenders. There should not be a one-size-fits-all approach…We think that limiting late fees can have a very significant impact on communities’ access to credit. It would result in more expensive products and services and account for some of the revenue loss. That could also contribute to further consolidation in the industry, not to mention that some institutions would probably have to exit the credit card market altogether.”
Petros added NAFCU believes the CFPB should instead focus on the underlying reasons why some consumers are stuck in cycles of indebtedness.
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