In its state of the union Tonight, President Biden highlighted his administration’s proposals to impose price controls on consumer fees, including fees charged by banks for late payments. “My administration is also charging ‘junk’ fees, those hidden fees that many companies use to get you to pay more,” he said. “We’ve reduced exorbitant bank overdraft fees, saving consumers more than $1 billion a year. We are reducing credit card late fees by 75%, from $30 to $8.” The latest action came in a proposal last week by the CFPB to remove a long-standing safe harbor that banks of all sizes rely on when setting late fees on credit card payments.
Biden repeated a misleading message about hiding overdraft and late payment fees. As ABA has pointed out on numerous occasions, the fees “are highly regulated and fully disclosed to consumers by law”. Also, unlike resort fees or ticket surcharges that Biden also discussed, consumers can choose to avoid them while using bank accounts.
In reaching out to the media before the speech, the ABA public relations team shared several key points that provide context for the crafting of Biden’s plans. “This proposal could actually reduce the availability of credit and hurt the millions of Americans who pay their credit card bills on time.” the Wall Street Journal quoted ABA as saying. ABA reinforced the cost of adding price controls to late fees for consumers who pay on time and the role an appropriate late fee plays in incentivizing on-time payments.
