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Wednesday's announcement from the CFPB, which proposed a rule to reduce credit card late fees, sounds like good news for consumers on the surface. Officials with CUNA and NAFCU said the proposal could actually run many credit unions right out of the credit card market, therefore hampering efforts to provide safe and affordable credit for numerous members.
If finalized, the CFPB proposed rule would enact the following:
- Lower the immunity provision dollar amount for late fees to $8 (this amount is down from $30 for a first-time late payment and $41 for subsequent late payments).
- End the automatic annual inflation adjustment.
- Cap late fees at 25% of the required minimum payment.
NAFCU President/CEO Dan Berger released a statement of his thoughts on the shortsightedness of the proposed rule. Berger argued the proposal "on its face may be about saving consumers money, but it amounts to financial chaos – ultimately sacrificing access to safe, affordable credit for millions of Americans who rely on it to afford daily life."
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Berger continued, "Cutting protections for credit card providers will price smaller, community-based financial institutions like credit unions out of the market," Berger added. "With this rulemaking, the bureau is ignoring its statutory mandated safeguard to protect small institutions and NAFCU's call to follow the law by conducting a SBREFA panel to analyze its impact. The consumers credit unions serve, many in low-income and underserved populations, will have reduced access to credit as a result.
"In addition, institutions will likely be forced to raise the price of checking and savings accounts or other loan products and reduce the benefits of other financial programs. This proposed rule, if finalized in its current form, will hit Americans hard," he said.
CUNA President/CEO Jim Nussle also stated he believes the CFPB's proposed rule could be potentially devastating to credit unions.
"CUNA strongly opposes this proposal, as any reduction in late fee safe harbors will have a significant negative impact on many small, community-based credit unions," Nussle said. "Not only would this proposal reduce access to safe and affordable open-end credit, but its broad impact clearly warrants the careful consideration of a Small Business Review Panel, and it's irresponsible for the bureau to bypass its statutory obligations under the Small Business Regulatory Enforcement Fairness Act, which was designed to calculate the impact on small entities."
Comments are due 30 days after the proposed rule is published in the Federal Register.
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Michael Ogden
Editor-in-Chief at CU Times. To connect, email at [email protected]. As Editor-in-Chief of CU Times since 2016, Michael Ogden has led the editorial team in all aspects of content strategy and execution, including the creation of the publication’s exclusive and proprietary research database of the credit union industry’s economic landscape. Under Michael’s leadership, CU Times has successfully shifted to an all-digital editorial product with new focuses on the payments, fraud, lending and regulatory beats. Most recently, he introduced a data-focused editorial product for subscribers that breaks down credit union issues into hard data, allowing for a deeper and more factual narrative for readers. In 2024, he launched the "Shared Accounts With CU Times" podcast, which offers a fresh, inside-the-newsroom perspective through interviews with leaders from the credit union industry and the regulatory world. He dives into pressing credit union issues, while revealing the personalities working behind-the-scenes to push the credit union world forward. His background includes years as a radio and TV anchor/reporter and a public relations and digital/social media manager, where he covered the food and music industries, as well as cooperatives and credit unions. Over the years, he has launched numerous exclusive video and podcast series, including a successful series of interactive backstage interviews with musicians at music festivals, showcasing his social media and live streaming production skills.
