CFPB Focuses on Credit Card Late Fees | PC Weiner Brodsky Kider
A recent CFPB report claims that most credit card companies charge the maximum late fees allowed under provisions set by the Federal Reserve Board of Governors (FRB) in 2010. These late fees are charged in addition interests and are, according to the CFPB, at the heart of corporate profit models. The report continues the CFPB’s recent focus on additional fees charged to consumers of financial services.
A 2010 FRB rule requires penalties to be “reasonable and proportionate,” but specifically allows credit card issuers to set late fees up to a specified level, subject to annual adjustment based on inflation. These limits recently increased to $30 for the first late payment and $41 for a subsequent late payment within 6 billing cycles.
The CFPB report also made several additional findings. First, he points out that subprime cards and private label cards are more likely to charge late fees. Second, the CFPB says the volume of late fees declined when stimulus checks arrived in 2020 and 2021, which the CFPB says suggests late fees serve as a penalty for paycheck-living households. by check rather than an incentive to make payments on time. And third, the CFPB found that consumers in low-income areas, areas with a high proportion of Black Americans, and areas with low economic mobility all paid higher late fees per capita than consumers in other areas.