CBA Reaffirms Opposition To Ideologically Driven Campaign Misrepresenting Well-Regulated Bank Fees

July 25, 2023

In a new letter sent to the U.S. Senate Subcommittee on Financial Institutions and Consumer Protection, the Consumer Bankers Association (CBA) reiterated opposition to the Biden Administration’s ongoing “junk fee” campaign that misrepresents well-regulated bank fees. In the letter, which comes ahead of a scheduled Subcommittee hearing tomorrow, CBA specifically addresses recent actions from the Consumer Financial Protection Bureau (CFPB) regarding credit card late fees and overdraft fees. 

Credit Card Late Fees 

Earlier this year, the CFPB announced a Notice of Proposed Rulemaking (NPRM) on credit card late fees that would drastically alter the credit card late fees landscape. As CBA notes, the rule would have significant negative implications for millions of consumers – including the vast majority of cardholders who pay on time:

“Reducing the safe harbor for the penalty fee […]  would significantly reduce the deterrent effect of the late fee, likely resulting in a greater share of late paying and delinquent accounts. […] The Bureau acknowledged that cardholders who never pay late– which the CFPB’s own data indicates is 74 percent of all Americans with credit cards – will not benefit from the reduced fees.”

A majority of Americans agree that credit card late fees are a necessary cost of providing financial products and services. According to an April study cited in the letter: 

57% of Americans believe that credit card late fees are legitimate, nearly half of all Americans, 48%, are unaware of the consequences associated with paying a credit card bill late, and 76% agree that paying your bill on time is a personal responsibility.”

The letter also highlights a recent Washington Post column debunking an incorrect figure cited by the Bureau regarding estimated consumer savings from the proposed rule, one of many false conclusions stemming from procedurally deficient data and analysis used by the agency: 

“The CFPB did not conduct a thorough analysis of the available economic literature on the effects or late fees, and the analysis that the CFPB did perform was not done in a transparent and consistent manner. The Bureau’s flawed assumptions and deficient analysis have resulted in incorrect conclusions about the benefits and harm to consumers, as well as the costs issuers face in the marketplace.”

Overdraft Fees

In addition to credit card late fees, policymakers also continue to scrutinize other fee-based bank products like overdraft, a criticism that fails to account for the growing number of innovative overdraft products and policies introduced over the past several years by America’s leading banks and the valuable role these financials play for millions of consumers in times of need. 

“As policymakers examine short-term liquidity products such as overdraft, it is essential to have a better understanding of consumer demand for the products, their use as a form of emergency liquidity or a financial safety net, and the evolution of the overdraft product by financial institutions. Limiting access to overdraft could hinder the ability of a consumer to pay unexpected bills or family emergencies.”

These changes – all made without regulatory or legislative intervention – not only provide consumers greater choice and control of their hard-earned money, they are also poised to yield significant savings. According to research from the global intelligence firm, Curinos:

“Newly announced changes to overdraft programs are projected to save consumers $18.3 billion from 2021 to 2025, more than $3.5 billion per year. Overdraft fees are projected to have declined by 82% since 2008, or $167 of annual savings per U.S. adult.”

To read the full letter, click HERE

CBA Advocacy 

  • To read more about CBA’s response to the CFPB’s credit card late fee proposal, click HERE. To learn more about CBA’s survey on credit card late fees, click HERE.
  • To learn more about recent reports underscoring the significant impact bank-led overdraft innovations are delivering in the lives of hardworking Americans, click HERE and HERE.