The California and Nevada Credit Union Leagues’ comment letter to the Consumer Financial Protection Bureau (CFPB) on a proposed credit card late-fee rule opposes the proposal and details several reasons why — including that it would ultimately harm the very consumers it intends to protect.
“While the Leagues support the CFPB’s intention to protect consumers and ensure that fees charged are reasonable, we have significant concerns with the practicality and implementation of the proposal and its potential for unintended adverse consequences,” the letter states, signed by Leagues President and CEO Diana Dykstra. “We believe that the CFPB’s proposed $8 safe harbor amount would ultimately harm the very consumers it desires to protect, and that the excessive requirements would have the potential to divert credit unions’ resources and attention away from their primary mission — to meet their members’ financial needs.”
The Leagues’ comment letter addresses the following areas of the bureau’s proposed rule:
The bureau’s proposal would lower the safe harbor to $8 (down from $30 for first time and $41 for subsequent late payments), end the automatic annual inflation adjustment, and cap fees at 25 percent of the minimum payment.
Earlier this year, the CFPB issued its proposed rule on credit card late fees, with the Leagues, the Credit Union National Association (CUNA), and other trade associations immediately stating they had major concerns with the proposal. At the time, CUNA wrote to the CFPB urging it to conduct a Small Business Review Panel, as required by statute.
The Leagues will monitor the situation as the bureau considers these viewpoints from credit unions.
Bureau Issues Proposed Rule on PACE Loans
The CFPB has also proposed a rule to implement a congressional mandate to establish consumer protections for residential Property Assessed Clean Energy (PACE) loans — which the Leagues intends to submit a formal comment letter on. Please email Lisa Quaranta with any thoughts, concerns, or feedback as the Leagues drafts this letter.
PACE loans, secured by a property tax-lien on the borrower’s home, are often promoted as a way to finance clean energy improvements such as solar panels. The CFPB’s proposed rule would require lenders to assess a borrower’s ability to repay a PACE loan and would provide a framework for how these loans will be treated under the Truth in Lending Act.
The CFPB also published a report on residential PACE loans, which found that the loans cause an increase in borrowers falling behind on their mortgage payments, along with other negative credit outcomes.
You can read the bureau’s news announcement here.