The Center for Capital Markets Competitiveness (“CCMC”) appreciates the opportunity to submit comments to the Consumer Financial Protection Bureau (“CFPB” or the “Bureau”) regarding its notice of Proposed Rulemaking to amend certain provisions of Regulation Z related to late fees charged on credit card accounts (the “Proposed Rule”).
Credit cards play an important and valuable role in American consumers’ lives. They allow consumers to manage their budgets across the month, participate fully in the economy, and cover surprise expenses. Credit cards also afford consumers an opportunity to build a credit history, which expands their access to other credit products, such as auto loans and mortgages. Regular, periodic payments are a defining feature of consumer credit cards—and timely payment is the hallmark of a customer relationship that is built for long-term success. Late fees apply when a consumer does not submit a required payment on the agreed-upon timeline. These fees are clearly disclosed at the time of account opening, and the consumer is aware of the obligation to repay the credit advanced. Such late fees play an important role in encouraging prudent consumer behavior by incentivizing borrowers to pay their bills on time. By doing so, late fees help consumers establish good repayment history, as well as avoid additional interest accruing on unpaid balances, future default on debt, and negative credit reporting. Accordingly, late fees serve an important purpose, as recognized by Congress in the Credit Card Accountability Responsibility and Disclosure (“CARD”) Act and by the federal, state, and local governments that all charge late fees to encourage timely payment of amounts owed (e.g. parking tickets and taxes). In contrast to the CFPB’s unfounded statements, late fees are not impermissible, so-called “junk fees” that fail to serve any purpose. Instead, they are heavily regulated by the CFPB, and the Federal Reserve before it.
