Ahead of today’s Senate Banking subcommittee hearing on “Fees and Tactics Impacting Americans’ Wallets,” government watchdog Accountable.US released a new analysis dispelling top myths employed by the credit card industry to excuse hidden and excessive late fees – including claims that lowering these junk fees will somehow have adverse effects on borrowers and that high credit card fees are actually beneficial to consumers.
FINANCIAL INDUSTRY RHETORIC VS REALITY ON JUNK FEES:
RHETORIC: Industry groups, such as the Consumer Bankers Association and Independent Community Bankers of America have argued that “junk fees” simply do not exist, calling the CFPB’s rulemaking “misguided.”
- REALITY: Academics point out that excessive fees were created in the 1990s, as late fee revenue for credit card issuers dramatically climbed from $1.7 billion in 1996 to $7.3 billion by 2001. CFPB data showed late fees cost consumers $12 billion by 2022.
RHETORIC: Industry claims that capping late fees at $8 would cause issuers to raise the cost of credit for consumers.
- REALITY: Evidence shows that previous regulations on credit card fees did not cause lenders to hike borrowing costs for consumers.
- REALITY: Data collected by the CFPB shows that low-income and Black-majority communities are already the most impacted by high credit card late fees.
RHETORIC: Industry argues that lowering credit card late fees would create fewer incentives for Americans to make payments on time.
- REALITY: Research shows previous regulations on credit card late fees did not cause Americans to be “less careful in avoiding [credit card late] fees.“
RHETORIC: Credit card issuers argue that the new “safe harbor” rule will not allow banks to adequately cover the costs of missed payments by Americans.
- REALITY: The CFPB and consumer groups have pointed out that banks can charge higher fees if they show the fee is needed to fully cover costs.
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