In a letter to Director Chopra, five banking trade groups address the CFPB’s obligation to comply with the Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA) before proposing a rule on credit card late fees and late payments. The groups are the American Bankers Association, Credit Union National Association, Independent Community Bankers of America, National Association of Federally-Insured Credit Unions, and National Bankers Association.
In its Fall 2022 rulemaking agenda, the CFPB indicated that it is considering whether to propose amendments to the Regulation Z rules on credit card penalty fees that implement the CARD Act, including the penalty fees safe harbors, and gave a January 2023 estimate for issuance of a Notice of Proposed Rulemaking. The CFPB had issued an Advance Notice of Proposed Rulemaking regarding credit card late fees in June 2022.
The trade groups’ letter reflects the concerns of industry that the CFPB intends to eliminate the penalty fee safe harbors or substantially reduce the safe harbor amounts in the near future. In the letter, the trade groups assert that any reduction in, or elimination of, the late fee safe harbor would have a significant adverse impact on a substantial number of community banks and credit unions with assets below $850 million. Under SBREFA, the CFPB must convene a Small Business Review Panel if it is considering a proposed rule that could have a significant economic impact on a substantial number of small entities. The trade groups state that of the approximately 805 credit card-issuing banks, more than half (451) have assets less than $850 million, and of the 3,127 credit card-issuing credit unions, 85 percent (2,670) have assets less than $850 million.
In addition to potentially changing the competitive position of small depository institutions overall, potential significant adverse impacts of a regulatory change to late fees identified in the letter are card issuers exiting the market altogether and an increase in the cost of, and a reduction in access to, credit by small businesses, as many small business owners use personal credit cards for business purchases. The trade groups state that because of the potential for any rulemaking to have a significant impact on a substantial number of small institutions, the CFPB must convene a SBREFA panel to consider the effects of any proposed amendments on small entities.