ABA to CFPB: Extreme Late Fee Proposal Would Harm Consumers, Reduce Access to Credit

"Today's extreme CFPB proposal will harm consumers by reducing competition and increasing the cost of credit. It will result in more late payments, higher debt and lower credit scores, and is inconsistent with the CARD Act’s encouragement of responsible credit management.

“If the proposal is enacted, credit card issuers will be forced to adjust to the new risks by reducing credit lines, tightening standards for new accounts and raising APRs for all consumers, including the millions who pay on time. The current safe harbor was created by the Federal Reserve under the Obama Administration and sustained by every CPFB Director until today. It was based on substantial research, stakeholder input and a careful rulemaking process, covers a significant portion of issuer costs, offers meaningful encouragement to pay on time and provides legal certainty to issuers and consistency to consumers.

"Besides being bad for consumers, this proposal flagrantly violates federal law meant to protect the competitiveness of community banks. As we made clear to the CFPB in a recent joint trades letter, any reduction in the late fee safe harbor would have a significant adverse impact on a substantial number of community banks and credit unions with assets below $850 million, many of which would be forced to exit the credit card market altogether. That will only reduce competition and access to credit. Accordingly, the CFPB must comply with its statutory obligations under the Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA), as a 'covered agency' designated by the Dodd-Frank Act.

“Americans value and appreciate the convenience and security they get from their credit cards, and they recognize there is a cost for that service. Today’s proposal ignores that reality. We will fight this proposal with facts, while continuing to challenge the Bureau’s efforts to unfairly demonize an industry critical to the U.S. economy.”