Republican House Members Press Chopra on Credit Card Late Fees Proposal

Last week, 17 Republican members of the House Financial Services Committee sent a letter to Rohit Chopra, Director of the Consumer Financial Protection Bureau (CFPB), concerning the CFPB’s credit card late fees proposal. When the proposal was issued, many industry members shared concerns that it would reduce competition and increase the cost of credit.

The lawmakers commented on the CFPB’s failure last year to adjust the Regulation Z late fee safe harbor amounts for inflation, noting that the Bureau “has yet to explain or justify why there was not an increase in the most recent annual adjustment announcement—a striking lack of transparency and accountability, and especially so in an era of outsized inflation,” according to Ballard Spahr.

The CFPB’s proposal would make credit providers increase interest rates for borrowers in order to offset account charge-offs and lost income. Providers may also have to limit how much they extend unsecured credit to borrowers with low credit scores.

The lawmakers were concerned that the CFPB has not complied with the Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA), as it is mandated to convene a SBREFA panel given the proposal’s impact on small banks and credit unions.

Another concern is that the CFPB did not adequately consider the proposal’s potential impact on consumer behavior, as late fees “provide incentives for customers to pay on time and discourage repeat underpayments or lack of payments,” the lawmakers argued.

The letter concludes with questions that the lawmakers requested the CFPB answer by this Wednesday, focusing on the Bureau’s quantitative, economic, or market analyses regarding the proposal and its potential impact. The lawmakers also asked the CFPB to detail its communication with the Biden administration and other federal agencies in developing the proposal.