Will Credit Card Late Fees Become a Thing of the Past?
In testimony to Congress, Consumer Financial Protection Bureau (CFPB) Director Rohit Chopra told lawmakers he’s asked his agency to explore ways to limit credit card fees and boost competition in the financial services industry.
Chopra’s remarks noted that competition in the marketplace means better service for consumers and said the status quo carries risks for consumers.
Competition leads to innovation, attractive rates, quality service, and benefits that may be difficult to quantify. But when consumers do not get to select their provider or when switching is complex or difficult, it can lead to stagnation, junk fees, and poor treatment. Indeed, in many markets for consumer financial products and services, like loan servicing and credit reporting, consumers have no choice of provider.
A Reuters report added that in response to questioning, Chopra specifically called out the credit card industry for their reliance on late fees.
“We want to make sure … that credit cards are a competitive market that people can use to find lower rates,” Chopra said in response to questioning about the CARD Act — a law passed in 2009 to curb abuse in the credit card market.
The CFPB issued a report earlier this year noting that credit card companies charged $12 billion in late fees in 2020.
As that report was released, Director Chopra stated it demonstrated a clear need for efforts to boost competition.
“Many credit card issuers have made late fee penalties a core part of their profit model. Markets work best when companies compete on price and service, rather than relying on back-end fees that obscure the true cost.” said CFPB Director Rohit Chopra. “Given their current practices, we expect that credit card issuers will hike fees, based on inflation, as limits continue to rise.”
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How Much do Consumers Pay in Credit Card Late Fees?
Consumer Bureau report says card issuers charged $12 billion in late fees in 2020
Originally published at https://original.newsbreak.com.