CFPB Proposes Revisions to Credit Card Late Fee Regulations

The CFPB proposed amendments to Regulation Z, which implements the Truth in Lending Act ("TILA"), to ensure that credit card companies uphold their obligations to charge fees that are "reasonable and proportional" on late payments.

The proposal would (i) limit the safe harbor dollar amount for late fees to $8, (ii) modify current provisions that provide for annual inflation adjustments for the safe harbor dollar amounts and (iii) impose a cap on late fee penalties of 25% of the required payment.

The CFPB requested feedback on whether the proposed rule should:

• prohibit late fees when the customer makes the required payment within 15 days of the due date;

• require card issuers, in order to make use of the immunity provision, to (i) offer automatic payment options, (ii) notify customers of upcoming payment due dates or (iii) provide both options; and

• eliminate the safe harbor provisions for certain fees.

The CFPB said that the proposed rule would only apply to late fees. However, the watchdog is considering expanding the provisions to other fees.