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1 1 (April 18, 2023)

handle is hein.crs/govelht0001 and id is 1 raw text is: Congressional ____ Sa Research Service CFPB Proposes New Credit Card Late Fee Regulation April 18, 2023 On March 29, 2023, the Consumer Financial Protection Bureau (CFPB) issued a Notice of Proposed Rulemaking to reduce late fees on credit cards. The rulemaking would amend Regulation Z, which implements the Truth in Lending Act (TILA; 15 U.S.C. §§1601 et seq.), by reducing the credit card late fee safe harbor to $8 (generally from $30 now). The CFPB is currently receiving comments on its proposed rule before it is finalized. This rulemaking is a part of a larger White House initiative called the President's Competition Council, which is intended to promote competition in the American economy by limiting junk fees. According to the CFPB, junk fees in consumer financial markets may include late fees, overdraft fees, out-of- network ATM fees, and inactivity fees, among other things. This Insight provides an overview of the credit card fee regulation and analyzes major parts of the CFPB's proposed rule. Background Credit cards allow a consumer to pay for transactions using unsecured revolving credit, meaning the loan is not secured with any collateral if the consumer defaults. According to the CFPB, over 180 million consumers-roughly 70% of U.S. adults-have credit cards, making it the most widely used consumer credit product. The 2009 Credit Card Accountability Responsibility and Disclosure Act (CARD Act; P.L. 111-24) established new disclosure and fee requirements for credit cards, among other things. In particular, the law requires that penalty fees, such as late payment fees, shall be reasonable and proportional. It tasks the CFPB to establish standards by considering the creditor's cost, the deterrence effect, the conduct of the cardholder, and other factors that the CFPB deems necessary or appropriate. The CFPB may also establish a safe harbor amount for penalty fees, which would specify an amount that complies with the law, allowing credit card companies to ensure that they are in compliance. A 2010 regulation adopted this approach to limit penalty fees, adjusted for inflation. The regulation currently establishes a safe harbor of $30 initially and $41 for each subsequent violation. Congressional Research Service https://crsreports.congress.gov IN12146 CRS INSIGHT Prepared for Members and Committees of Congress

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