Financial Trades: CFPB Credit Card Penalty Fee Rule Could Violate Law

Credit union groups CUNA and NAFCU were among the financial trade advocates voicing concerns over a proposed CFPB credit card fee rule. Learn why.

David Baumann


Jan 24



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David Baumann

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David Baumann

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Credit union groups CUNA and NAFCU among those voicing concerns over proposed regulatory changes.

The CFPB would be violating federal law if it does not convene a small business impact panel before issuing a controversial rule governing credit union and bank credit card penalty fees, financial trade groups told the agency Friday.

In its semi-annual regulatory agenda, released last month, the CFPB said it is considering whether to propose regulatory changes relating to penalty fees levied by card issuers. The bureau also noted it had issued an advanced notice of proposed rulemaking in June seeking information related to the fees and said it was evaluating those comments.

Concern from Credit Union Groups

Financial trade advocates are pushing back, however, with a group including CUNA, NAFCU and the American Bankers Association submitting a joint letter to CFPB Director Rohit Chopra outlining their concerns.

In the letter, the groups said that—as they had stated in previous comments—any changes in the fee structure “would have a significant adverse impact on a substantial number of community banks and credit unions, with assets below $850 million.”

As a result, they said, the Small Business Regulatory Enforcement Fairness Act (SBREFA) requires the CFPB to convene a Small Business Review panel because it is considering a proposed rule that could have a significant impact on small entities.

“In light of this obligation, we were surprised to see that the CFPB is at the Proposed Rule stage and, according to the CFPB’s own submission to the Unified Agenda of Regulatory and Deregulatory Action (Unified Agenda), that the CFPB plans to issue a Notice of Proposed Rulemaking in January 2023,” the letter continues.

More on the Small Business Review Panel

The groups noted that the panel is required to collect advice and recommendations from small entities or their representatives. Additionally, the CFPB is required to collect information about whether the proposal would increase the cost of credit for small businesses.

The letter also reminded bureau officials that the groups themselves had previously told the CFPB that of the 3,217 credit card-issuing credit unions, 2,670—85%—have assets of less than $850 million.

The groups added further that some financial institutions have indicated they might have to consider exiting the credit card market entirely if penalty fee regulations are changed. In addition, they said, reducing the amount that card issuers may charge for late payments could increase costs for small businesses that use cards for business purchases.

“Indeed, any regulatory change to late fees would ultimately impact the entire card market and bring with it the potential to change the competitive position of small depository institutions in ways that must be explored through the SBREFA process,” they wrote.

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