What Does the CFPB’s Credit Card Penalty Fees Mean for Your Credit Union?
On February 1, 2023, the Consumer Financial Protection Bureau (CFPB) issued their proposal to amend Regulation Z regarding Credit Card Penalty Fees. When the CFPB didn’t adjust their annual safe harbor thresholds with the other annual updates this year, it was clear this plan was coming. The CFPB’s recent (over the past few years) campaigns related to Junk Fees also painted a clear picture that a proposal like this was on the way.
The proposed rule would:
- Adjust the safe harbor dollar amount for late fees to $8 (reduction from $30) and eliminate a higher safe harbor dollar amount for late fees for subsequent violations of the same type;
- Eliminate the annual inflation adjustments to the amount of safe harbor late fees each year; and
- Provide that late fee amounts must not exceed 25% of the required minimum periodic payment due.
While the proposal is specifically related to late fees at this time, the CFPB is also seeking comments on whether the proposed amendments should apply to other penalty fees (such as over-the-limit fees, returned payment fees, etc.) and eliminate the corresponding safe harbor provisions.
Comments are also being solicited on whether card issuers should be prohibited from imposing late fees on consumers that make their required payments within 15 calendar days following the due date.
CrossState will be submitting comments on the proposed rule. If you have comments or concerns regarding the rule, please contact the CrossState Compliance Team.