The Consumer Financial Protection Bureau’s “untested and unvalidated assumptions” about charge card late costs are incorrect, especially about the deterrence result of late costs, and lead to “flawed policy,” the American Bankers Association and 2 banking and charge card associations stated Wednesday. In a joint letter on the CFPB’s proposition to decrease the safe harbor quantity for late costs, the associations stated the rulemaking would increase the expense of charge card, make cards harder to get and decrease the variety of organizations that provide the items.
“As with many obligations, late fees provide an important incentive to pay on time and help cover the costs and risk of people failing to pay,” the associations stated. “Late fees are designed to recover at least part of the issuer’s costs associated with late payment, encourage on‐time payments, minimize defaults and delinquencies, and promote good credit management.”
The letter mentioned a current study commissioned by ABA that discovered late costs are more efficient in inspiring customers to pay expenses on time than unfavorable credit history. They likewise kept in mind that 68% of customers surveyed thought that it is affordable for banks to charge late costs.
In addition, the associations argued the CFPB breached different procedure and procedural requirements. The bureau stopped working to think about the results of the proposition on little banks and cooperative credit union, the groups stated, including that it is participating in “rushed rulemaking with a preordained outcome,” in infraction of the Administrative Procedure Act. The trade groups likewise argued that the proposition signifies an intent to avert an arrangement in Truth in Lending Act that states the efficient dates of policies consisting of brand-new or altered TILA disclosure requirements.
