Late last week, a federal judge upheld an order blocking the cap on credit card late fees. As reported by PYMNTS. but The debate over fees – their usefulness, whether they should exist or not. At all —It's not over yet.
But for now, the Consumer Financial Protection Bureau's (CFPB) move to limit these fees to about $8 through safe harbor provisions, which most recently stood at about $32 across the industry, remains unchanged. It is. Injunction.
In the judgment itself, U.S. District Judge Mark Pittman wrote: card method Explicitly allows card issuers to impose “penalties”[s]However, the CFPB's final rule lowered the card issuer fee to $8 because it “will, on average, cover the collection costs before amortization for large card issuers,” it added. …However, a fee to cover “costs'' and a fee that constitutes a “fine'' are not the same thing. ”
A question of deterrence?
Pittman judgment continued “'Fine' includes the purpose of deterrence. … Importantly, under the CARD Act, card issuers must have the opportunity to There is a need to charge penalty fees that are reasonable and proportionate to the violation, and narrowing the safety zone to cost-based fees misses that opportunity. ”
ultimate destiny and/or As a new presidential administration takes office, the CFPB's influence remains unclear. and At least some card issuers had raised fees in anticipation that if the caps were approved, card companies would be cut off from a source of revenue from late fees.
Additionally, consumers who miss their payment deadlines are often late on multiple payments, with an average of 14 payments late across all types of debt, according to the data.
Our contributions to card issuers are as follows: The Federal Reserve Board noted that: Fees, especially late fees Feetied to about 15% of credit card profitability (the CFPB estimates that late fees will be charged to cardholders as much as $14 billion in 2022).
Effect of cap
In a lawsuit filed in March 2024, The plaintiffs wrote in a statement to the U.S. Chamber of Commerce seeking an injunction that “late fees encourage timely payments, which in turn help card issuers manage credit risk, reduce costs, and serve a broader customer base.” “We will be able to offer more competitive conditions and features to our customers.” of the population. ”
Additionally, according to the filing, “this rule could force issuers to increase minimum payments, annual fees, or annual interest rates; reduce credit limits; or reduce compensation. ” To elaborate on the compensation value proposition: PYMNTS Intelligence reported earlier this year that 68% of consumers surveyed said perks are an important factor in choosing a card.
By setting a cap on fees, additional The lawsuit alleges that if a cardholder's credit score declines, their credit will be limited by the issuer, and “cardholders who are subject to late payments may be harmed.”
