The Consumer Financial Protection Bureau (CFPB) has issued a rule lowering late fees charged by many credit card issuers, and as a result, the rule will limit access to affordable consumer credit and reduce credit card charges. Consumers who pay the fee will be penalized. on time. The U.S. Chamber of Commerce said last year that 75% of credit card users pay their bills on time.
On March 7, 2024, the U.S. Chamber of Commerce sued the CFPB for exceeding its statutory authority, ignoring our comments, and making few changes to its rules despite 57,000 other comments. did. Instead, the CFPB prioritized an agenda of corporate micromanagement and consumer harm.
The CFPB rule contains only two changes from the proposal. Arbitrarily exempting small credit card issuers (those with less than 1 million accounts, representing about 5 percent of all credit cards) and capping late payments at 25 percent of the minimum required payment. We have also deleted the clauses.
The rule governs how banks will charge consumers who are late on their credit card bills, and uses multiple flawed “studies” to justify its basis. . The errors in this report are:
- “Data Spotlight” relies on inaccurate methodology. Weeks before the final rule was issued, the CFPB released a “data spotlight” alleging that large banks charge higher credit card interest rates than smaller banks. This was likely an attempt to justify the exemption for credit card issuers with fewer than 1 million accounts. But the company relies on flawed methodology, such as not making clear that the population of “small banks” also includes credit unions. The CFPB recognizes that these two types of institutions are not the same. In fact, some important distinctions are established by law. For example:
- Price differences do not equate to anti-competitive behavior.The CFPB's “Data Spotlight” argues that disparate credit card rates indicate anti-competitive conduct. However, a competitive market is characterized by thousands of banks and credit unions relying on different business models and offering different credit card products with different terms and prices.
- Not all banks are the same. Unlike large national banks, credit unions and community banks are more likely to have multiple relationships with consumers. They may offer mortgage car loans, or provide information about checking account cash flow that helps them understand a borrower's credit risk and offer lower interest rates. in contrast, IMany national credit card issuers have the scale and expertise to serve consumers who are traditionally unbanked or new to credit.
Lawmakers are beginning to intervene in flawed rulemaking. Sen. Tim Scott (R-S.C.), ranking member of the Senate Banking, Housing, and Urban Affairs Committee, and Rep. Andy Barr (R-Ky.), chairman of the House Financial Services Committee's Financial Institutions and Monetary Policy Subcommittee. ) filed resolutions in the House and Senate to override this rule through the Congressional Review Act (CRA). If passed, the bill would prohibit the CFPB from enforcing “substantially the same” rules. The U.S. Chamber of Commerce supports Congressional action to stop this misguided rule from harming responsible credit card users.
The CFPB should repeal this rule and Congress should pass the CRA resolution.
About the author
Bill Hulse
Ms. Hulse oversees CCMC's day-to-day efforts, including policy development, advocacy, and communications.
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