CFPB Price Controls on Late Fees Mean Less Credit, Higher Costs for Cardholders 

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Today, the Consumer Financial Protection Bureau (CFPB) finalized a rule on credit card late fees that would do far more harm than good, according to CEI Director of Finance Policy John Berlau:

“As expected, the CFPB final rule on credit card late fees mandates the same destructive price controls as the proposed rule: a hard price cap of $8 that credit unions and banks issuing credit cards may not exceed. Such a stringent price control is bad economics anytime, but is especially harmful during times of inflation. If not stopped, the CFPB regulation will have negative consequences for middle-class and lower-income consumers, as well as smaller banks and credit unions that issue credit cards.

“As the CFPB itself acknowledged in proposing this rule, restrictions on the ability to charge late fees on credit cards will translate into higher charges for consumers who make their payments on time. The CFPB is proposing price controls that will raise the overall cost of credit for everyone by disincentivizing providers who take the risk in offering credit that they may not be paid back.

“If not stopped, the price controls in this rule will greatly reduce the availability of credit, particularly for lower-income consumers. And all consumers will likely see a cutback in benefits such as credit card rewards that middle-class families and retirees utilize to make travel and other purchases more affordable. Congress should overturn this deeply flawed rule to free consumers and Main Street financial institutions from another piece of harmful red tape.”

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