CFPB Focus on Credit Card Penalty Fees

June 2022

KPMG Insights. Much like the CFPB’s recent request for information on overdraft protection practices (see KPMG Regulatory Alert), the CFPB acknowledges that credit card penalty fees “disproportionately burden consumers in low income neighborhoods” and, based on its own report findings, looks to assess companies’ reliance on those fees as a significant source of income. These reviews/inquiries are part of the CFPB’s initiative to reduce “junk fees” charged by banks and financial companies (announced in January 2022). They are similarly part of a larger supervisory focus on consumer protection and fairness, that also includes practices related to account holds/freezes, fraud controls, credit decisions, and complaints management.  All CFPB-supervised credit card issuers must anticipate heightened regulatory scrutiny of their credit card penalty policies and should consider re-evaluating their policies and practices, including the use of the regulatory safe harbor, in light of the CFPB’s areas of interest, as outlined in the ANPR. Notably, CFPB concedes that a small but increasing percentage of companies charge no late fees or offer products with increased flexibility for late payments.