Banking Interest Group Opposes Limiting Credit Card Late Fees

Advocate Andy

Bankers respond to consumer bureau proposal to limit late fee charges

Following news that the Consumer Financial Protection Bureau (CFPB) plans to issue rules that would limit or reduce credit card late fees, a group representing the banking industry spoke out in opposition.

The American Bankers Association sent a letter to the CFPB denouncing the move and noting that many small and community banks would be negatively impacted by the proposed move.

Industry representatives 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."

The concern of the ABA appears to be those institutions with less than $850 million in assets - considered in the banking world to be "small" banks.

While the nation's largest banks could likely weather the storm of lost revenue created by a late fee change, the ABA argues that smaller banks would lose sufficient revenue that changing their business model would be necessary.

The CFPB is in the early stages of reviewing credit card late fees as part of a larger effort to root out "junk fees" in the financial services industry.

“Many credit card issuers have made late fee penalties a core part of their profit model. Markets work best when companies compete on price and service, rather than relying on back-end fees that obscure the true cost.” said CFPB Director Rohit Chopra. “Given their current practices, we expect that credit card issuers will hike fees, based on inflation, as limits continue to rise.”

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Andy Spears is a middle Tennessee writer and policy advocate. He reports on news around public policy issues - education, health care, consumer protection, and more.

Nashville, TN

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