The CFPB has issued a proposal that would make significant changes to the current rules for credit card late fees, including substantially reducing the safe harbor late fee amounts that card issuers can charge and eliminating annual inflation adjustments. After reviewing the legislative and regulatory history of the current rules, we look at the CFPB’s flawed rationale for reducing the safe harbor to a flat $8 for all late payments, identify the serious flaws in its economic analysis of the likely effects of the reduction, and discuss how the proposal relates to the Biden Administration’s junk fees initiative. We also discuss the likelihood of the proposal’s adoption in its current form and potential legal challenges to a final regulation. We conclude by looking at other major changes on which the CFPB seeks comment in the proposal, such as whether to require issuers using the safe harbor to provide a 15-day courtesy period before imposing a late charge and offer automatic payment options.
Alan Kaplinsky, Senior Counsel in Ballard Spahr’s Consumer Financial Services Group, hosts the conversation.
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By Ballard Spahr LLP
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The CFPB has issued a proposal that would make significant changes to the current rules for credit card late fees, including substantially reducing the safe harbor late fee amounts that card issuers can charge and eliminating annual inflation adjustments. After reviewing the legislative and regulatory history of the current rules, we look at the CFPB’s flawed rationale for reducing the safe harbor to a flat $8 for all late payments, identify the serious flaws in its economic analysis of the likely effects of the reduction, and discuss how the proposal relates to the Biden Administration’s junk fees initiative. We also discuss the likelihood of the proposal’s adoption in its current form and potential legal challenges to a final regulation. We conclude by looking at other major changes on which the CFPB seeks comment in the proposal, such as whether to require issuers using the safe harbor to provide a 15-day courtesy period before imposing a late charge and offer automatic payment options.
Alan Kaplinsky, Senior Counsel in Ballard Spahr’s Consumer Financial Services Group, hosts the conversation.
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