- Source: consumerfinance.gov
Treliant knows fairness and consumer protection. If your financial services company needs assistance with evaluating your practices for UDAAP risks, we can help.
On March 29, 2022 the CFPB issued a report on Credit card late fees. The report indicates credit card companies charged $12 billion in late penalties in 2020. While this is down by $2 billion from the year before due, in part, to pandemic relief efforts, fee volume was on the rise again in 2021. Key highlights of the report include:
- Late fees account for 99% of penalty fees and over half of the credit card market’s total consumer fees.
- Late fees represent a larger share of charges for issuers primarily serving consumers with lower credit scores than for issuers that extend little to no credit to such consumers.
- While more companies are removing late fees or offering products with increased flexibility for late payments, the overall credit card market still relies on late fees.
- The largest issuers set penalty fees at or near the maximum level eligible for safe harbor treatment under current regulation.
- Late fees disproportionately burden consumers in low-income and majority-Black neighborhoods.
- Cardholders with subprime and deep subprime scores are far more likely to incur repeat late fees in a given year than those in higher credit score tiers.
This report, along with the CFPB’s February 2, 2022 blog post about Junk Fees, is another indication of the direction the CFPB is going and how UDAAP will be a vital part of all future exams. If you are a credit card issuer, take stock in the messages the regulators are sending and evaluate your reliance on such fees.