CFPB releases proposed rule on credit card late fees
As we blogged about last November, the CFPB is on a quest against “junk” fees. So far, this has included regulatory enforcement actions, guidance on surprise overdraft fees, and guidance on depositor fees. Recently, the CFPB has found a new “junk” fee.
On February 1st, the CFPB published a proposed rule to limit credit card late fees by amending Regulation Z, section 1026.52(b).
Current Law
Section 1026.52(b) places limitations on penalty fees that a card issuer can charge by either basing the fee off of estimated costs or by using a safe harbor amount. Section 1026.52(b)(1)(i) permits a card issuer to base a penalty fee on a “reasonable proportion of the total costs incurred by the card issuer as a result of that type of violation.” However, under section 1026.52(1)(ii) a card issuer may instead set a penalty rate using a safe harbor. For non-sequential violations, the regulation permits a penalty fee of $30. However, if the card issuer previously imposed a fee for the same violation, during the same billing cycle or within the last six billing cycles, the card issuer may charge a fee of $41.
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