CFPB Proposes to Overturn Longstanding Credit Card Late Fee Safe Harbor

Posted: Feb 08 2023

The CFPB and the White House are proposing to eliminate a longstanding safe harbor that banks of all sizes rely upon when setting late fees on credit card payments. Citing “excessive credit card late fees,” the CFPB proposed slashing the safe harbor dollar amount for late fees from $30 to $8 and eliminating a higher safe harbor dollar amount for late fees for subsequent violations of the same type; eliminating the annual inflation adjustment for the safe harbor amount that was provided by the Federal Reserve Board in 2010; and capping late fee amounts at 25% of the required payment.

In a notice of proposed rulemaking, the CFPB is proposing to amend Regulation Z, which implements the Truth in Lending Act, because in its view, the current safe dollar amount for late fees in the regulation is “not reasonable or proportional” to the violation to which the fee relates. The CFPB issued an advanced notice of proposed rulemaking last year, to which ABA and others responded, urging caution regarding any changes to the time-tested safe harbor. At that time and in subsequent letters, the financial industry reminded CFPB that it has failed to follow a required process for determining the impact of its rulemaking on small credit card issuers.

To read more, visit: https://files.consumerfinance.gov/f/documents/cfpb_credit-card-penalty-fees-nprm_2023-01.pdf