CFPB’s report on credit card late fees

A few weeks ago, the Consumer Financial Protection Bureau (CFPB) published a report reviewing the trends in credit card late fees over the last few years. CFPB Director Chopra says, “many credit card issuers have made late fee penalties a core part of their profit model.” The report explains that late fees make up more than half of all credit card penalty fees and create a significant amount of income to credit card issuers.

In the report, the bureau spends a significant amount of time reviewing the impact to borrowers caused by excessive late fees. First, repeat late fees are typically higher than first time late fees, sometimes with an increase of $10-15. The bureau explains that this can be harmful to members with lower income and credit scores because they are more likely to make repeat late payments. The CFPB also explains that these members are much more likely to have subprime or deep subprime credit card terms, which are associated with higher interest payments and increased incidences of being charged a late payment.

Here is one visual from the report, showing the frequency at which subprime credit card accounts were charged late fees in 2019. Contrarily, most above prime accounts went the calendar year without incurring a late fee.


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