Comments from U.S. Rep. Patrick McHenry, chairman of the House Financial Services Committee, highlight how the bureau’s new rule on credit card late fees raises the cost of borrowing for all consumers and is politically motivated. The committee will discuss politicized financial regulations in a hearing Thursday.
03/05/2024 3:10 P.M.
2.5 minute read
The Consumer Financial Protection Bureau finalized a rule Tuesday addressing excessive credit card late fees, reducing the typical fee from $32 to $8.
The bureau, which started its push for regulating fees in 2022, noted in a news release that it reviewed market data related to the Credit Card Accountability Responsibility and Disclosure Act of 2009 and is acting to close a 2010 “loophole.”
The CFPB’s final rule lowers the threshold for a late payment fee to $8 and ends automatic inflation adjustments for issuers that have 1 million or more open accounts. It allows larger card issuers to charge fees above the threshold so long as they can prove the higher fee is necessary to cover their actual collection costs.
Members of Congress, particularly Republican leaders on the House Financial Services Committee, weighed in on the CFPB’s monitoring of fees in the last year, and the final rule restored their ire about the issue.
Chairman of the House Financial Services Committee Patrick McHenry, R-N.C., issued a statement against the rule Tuesday.
“The Biden [a]dministration continues to weaponize financial regulators to play politics in an election year,” McHenry said. “Just days before the State of the Union, it is clear that this [a]dministration plans to take a ‘victory lap’ at the expense of American consumers. This calls into question the composition and motivation of this rulemaking. The final rule suffers from the same fatal flaws as the proposal. The CFPB should get back to protecting consumers instead of blindly taking marching orders from the President’s political team. It’s time for the Biden [a]dministration to focus on lowering costs for all Americans and stop using independent regulators to play political games.”
The House Financial Services Committee will hold a hearing Thursday, “Politicized Financial Regulation and its Impact on Consumer Credit and Community Development.”
The hearing will “explore recent actions and proposals by federal financial regulatory agencies that will limit financial options and restrict access to financial services for consumers, particularly through mandated fee caps and government price fixing,” according to a committee memo (PDF.)
The effective date of the CFPB’s final rule will be 60 days after publication of the rule in the Federal Register. Read the text of the final rule.
ACA’s Take
The bureau previously sought comments on credit card fees through an advance notice of proposed rulemaking, and ACA International responded with an overview of the use of fees in the debt collection industry, ACA previously reported.
Congress also noted in a 2022 letter (PDF) that “the CFPB broadly groups all fees associated with consumer products and services as ‘junk fees’ and does not provide any legal definition of the term or any statutory authority to define such a term.”
ACA strongly agrees with this concern. Moreover, we are disappointed that it has been a trend for the CFPB to use pejorative terms when describing not only the debt collection industry, but also most participants in the financial services industry.
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