Continued focus on consumer fees and “fairness”
KPMG Insights. The CFPB’s proposed changes to credit card late fees and its direct request for consumer and issuer feedback on experiences in the credit card market demonstrate continued focus on consumer fees and “fairness” (see KPMG Regulatory Alerts, here and here). It is likely that this proposal and RFI will generate strong responses from the industry. Similar to the CFPB focus on overdraft and NSF practices, it is possible as well that the focus to fee practices in this space may result in individual provider product or other changes. Fee income practices, earnings from fees and complaint, claim or dispute practices related to fees will continue to e a regulatory focal area for examinations, supervision and/or investigations.
The Consumer Financial Protection Bureau (CFPB) has continued to focus on consumer fees with the following recent actions:
Details of these recent releases are highlighted below.
Currently, under Regulation Z (Section 1026.52(b) and the accompanying commentary), a card issuer must not impose a fee for violating the terms or other requirements of a credit card account under an open-end consumer credit plan (such as a late payment, charges beyond the credit limit, or returned payments) unless the issuer has determined that the fee amount represents a reasonable proportion of the total costs incurred for that type of violation. An issuer can also comply with the safe harbor provisions, which currently sets such penalty fees at $30 (generally) for the initial violation and $41 for each subsequent violation of the same type occurring in the same or next six billing cycles.
The proposal would amend these provisions with regard to late fees by:
In addition, the proposal would amend the accompanying commentary by:
Questions for comment. The CFPB notes that their research indicates that late fees are the most prevalent penalty fees credit card consumers face, and as such the CFPB is limiting the proposed penalty fee changes to late fees at this time. The CFPB, however, is also seeking comment on potential other changes to the credit card-related regulations, including whether:
The CFPB is seeking public comments on the proposed rule, with a deadline to submit by April 3, 2023, or within 30 days from publication in the Federal Register, whichever is later.
CFPB recently issued a RFI on the consumer credit card market as part of its biennial review of the industry. Public and industry feedback (comments are requested on or before April 24. 2023), specifically on the following topics, will inform CFPB’s report on the credit card market: