CFPB Releases Report Evidencing Billions in Credit Card Late Fee Penalties

Kennedy Sutherland LLP previously reported that the Consumer Finance Protection Bureau (“CFPB”) had set its sights on such consumer “junk fees” as late fees and overdraft fees.

On March 29, 2022, the CFPB reported that issuers of consumer credit cards charged $12 billion in late fees in 2020. According to CFPB Director Rohit Chopra, the report affirms that many credit card issuers have utilized late fee penalties as “a core part of their profit model[,]” which suggests that the current practices will continue and lead to a rise in added fees in the near future as inflation rises.

The report provided the following significant findings:

• 18 of the top 20 issuers charged consumers at or near the maximum late fee permitted;

• Subprime credit cards and private label cards were particularly susceptible to late fee charges;

• The volume of late fee assessments on consumers fell during 2020 and 2021, after the extension of stimulus checks by the federal government, which reportedly “improved household balances and liquidity”; and

• Low-income areas, areas with a diverse majority, and areas with “lower economic mobility” are most susceptible to late fees.

Given the recent actions and statements by the CFPB regarding large financial institutions assessing additional fees onto the consumers who utilize or seek to utilize their products, the predicted increases in credit card fees may incur enhanced regulatory scrutiny and review from the CFPB.