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CBA Letter in Support of the Transparency in CFPB Cost-Benefit Analysis Act (S.1362)
On behalf of the Consumer Bankers Association (CBA), I write to express our support for S. 1362, the Transparency in CFPB Cost-Benefit Analysis Act. This bill is an important component of CFPB reform and will help ensure the Bureau’s policies are grounded in sound data and evidence.
Cost-benefit analysis is an important tool for regulators to use to balance the costs of implementing and complying with a regulation for all affected parties. While a number of executive branch agencies must conduct cost-benefit analysis as part of the rulemaking process, independent regulatory agencies like the CFPB do not have a rigorous statutory cost-benefit analysis requirement. Dodd-Frank requires the Bureau to consider the costs associated with rules, but leaves the details largely up to the agency’s discretion, often resulting in lopsided rules that may sound positive in concept but have damaging consequences.
The Bureau’s credit card late fee proposal is a perfect example of why more thorough cost-benefit analysis is needed. The CFPB’s proposed rule to lower the safe harbor dollar amount for credit card late fees to $8 directly points to the Bureau’s lack of data analysis that is necessary to truly understand its consumer impact. In the proposal, the Bureau claims that it could help some credit card customers. However, the Bureau acknowledged in the proposal that cardholders who never pay late– which the CFPB’s own data indicates is 74 percent of all Americans with credit cards–1 will not benefit from the reduced fees and could experience “…higher maintenance fees, lower rewards, or higher interest on interest-paying accounts,” and that increased costs could completely negate any benefits.2 Banks are required by their prudential regulators to manage and offset credit risk, and a reduction of the ability for financial institutions to recoup costs could result in a tightening of credit availability for some consumers. The rigorous review of a detailed cost-benefit analysis would prevent additional burdens from being placed on the consumer.
CBA believes that weighing both the advantages and regulatory compliance burdens of proposed rules will lead to more balanced policies from the CFPB. We appreciate your leadership on this issue and look forward to working with you to advance this legislation.