Washington, D.C.—U.S. Congressman Andy Barr (R-KY), House Financial Services Committee Chairman Patrick McHenry (R-NC), and 16 other Republicans sent a letter to the Consumer Financial Protection Bureau on Wednesday pushing back on the Bureau’s credit card late fee proposal.  Congressman Barr, who chairs the Subcommittee on Financial Institutions and Monetary Policy, led the letter, which you can read here.

“In December 2022, the CFPB broke with precedent and for the first time failed to address credit card late fees when it issued the annual fee adjustments as required under Regulation Z.1 The annual adjustments have typically reflected changes to safe harbor fee levels to reflect changes in a Consumer Price Index (CPI) measure produced by the Bureau of Labor Statistics,” the members wrote in part. 

“As detailed in our March 30, 2022, letter on the CFPB’s “junk fees” request for information (RFI), we agree that consumer education and simplification of disclosures should be addressed. 5 However, the provision of credit and other financial products have associated costs, which late fees often help to offset. The late fees targeted in this proposal will ultimately result in negative consequences. Credit providers will be forced to offset lost income and potential account charge-offs by increasing interest rates for all borrowers (i.e., socialize the costs of late and defaulting payors) or limiting extension of unsecured credit to borrowers with low credit scores. The CFPB acknowledged this fact in the proposed rule, stating it is “possible that some consumers’ access to credit could fall” as a result of limiting late fees.6 Indeed, that result is highly likely, not simply possible.”

The members concluded their letter with a series of questions, which read in part:

1. Given the broad applicability of this rule making to small institutions, why did the CFPB not convene a SBREFA panel?

2. Please provide all economic and quantitative analyses that the CFPB has conducted on the projected impacts, including with respect to consumer access to credit and costs of obtaining credit, of the proposed rule.

3. How did the CFPB arrive at the determination that $8 would be sufficient for most issuers to cover collection costs incurred as result of late payments? Please provide all market analysis and any other supporting documentation for this determination, along with robustness analysis that determined that $8, rather than other possible dollar values, is a preferred value.

You can read the full letter and series of questions here