GOP Senators Tell Chopra to Kill ‘Junk Fee’ Rule; CFPB Doubles Down

The battle over credit card late fees has intensified, with GOP Senators and credit union trade groups aligned against the CFPB. Learn why.

David Baumann


Apr 18



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David Baumann

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David Baumann

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The battle over credit card late fees—opposed by credit union trades—has intensified.

Nine Republicans on the Senate Banking Committee are urging CFPB Director Rohit Chopra to abandon efforts to control credit card late fees—a request that the director appears to be ignoring.

“The CFPB’s efforts to eradicate responsible financial incentives under the guise of consumer aid is deceptive and should have no place in the United States Government,” the nine Republicans, led by ranking GOP member Sen. Tim Scott of South Carolina, wrote in a letter to Chopra last week.

President Biden and the CFPB have been attempting to regulate so-called “junk fees” charged on various consumer products. The CFPB has proposed a rule that would limit credit card late fees to $8—a plan that credit union and banking trade groups have vehemently opposed.

The GOP senators agreed with the trade groups.

“Capriciously lowering the cost of late fees that a credit provider may legally charge to a fixed dollar figure arbitrarily selected by your agency will raise the cost of credit for all American consumers,” they told Chopra.

They said that if the expenses incurred by credit providers as a result of late payments are not paid for by late borrowers, then they will be paid by other borrowers.

“Shifting costs from a small subset of borrowers to the entire pool of borrowers raises the cost of borrowing for all, including those who made sacrifices to pay their bills on time,” they wrote.

They also contend that the limits on late fees also could result in credit providers deciding to only provide credit to people who are likely to make their payments on time.

“Unfortunately, it is likely to be the most vulnerable consumers with the most urgent financial needs who will suffer most as a result of this regulatory proposal,” they wrote.

CFPB Doubles Down

However, Chopra, in a statement issued Monday, said the bureau is attempting to regulate only “unreasonable or out-of-proportion penalty fees.”

And in testimony presented to the Pennsylvania state House Consumer Protection, Technology and Utilities Committee last week, a CFPB official urged states to join the effort to limit “junk fees.”

“These junk fees, often buried in fine print or never disclosed at all, can obscure the true price of products and dilute market competition,” Brian Shearer, a senior advisor to Chopra told the committee.

While he did not single out financial institutions, Shearer said that companies have become adept at hiding the true cost of products by funneling costs into junk fees.

Shearer said that many states have statutes that allow state regulators to police unfair or deceptive acts or practices, and he urged those regulators to limit junk fees using that authority. He also urged state officials who do not have such statutes to enact them.

“In the CFPB’s view, it is prudent for states to include junk fees in these lists of prohibited practices,” he told the committee. “These kinds of laws would make explicit what is often already illegal under the general [Unfair, Deceptive, and Abusive Practices] statutes, and they could make it easier for state attorneys general, state regulators, and consumers to enforce these statutes against junk fees.”

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