The Consumer Financial Protection Bureau’s proposal to revise the safe harbor dollar amount for credit card late fees lacks evidence to support its contention that the rule will not have significant economic effects on a number of small entities, wrote the independent Advocacy Office of the Small Business Administration. in a recent letter to the office. The CFPB has proposed to reduce the safe haven dollar amount for late fees from $30 to $8 and to eliminate a higher safe harbor dollar amount for late fees for subsequent violations of the same type. However, the SBA Advocacy letter disputed a number of claims made by the CFPB to justify the rule change, noting that the bureau had issued its analysis despite a lack of data on small deposit takers.
“Advocacy is concerned about the shortcomings of this rule under the [Regulatory Flexibility Act] and the CFPB’s reliance on data representing the activities of large institutions,” SBA Advocacy said in its letter. “For the above reasons, Advocacy recommends that the CFPB maintain the status quo for small entities until the CFPB has sufficient data to conduct a more comprehensive analysis of the economic impact that the proposed regulation may have on small entities.”
SBA Advocacy cited four main concerns about the regulation. First, the agency is concerned that the CFPB does not have the data necessary to develop an adequate factual basis for its certification. Second, the CFPB does not have enough information to indicate that small institutions contribute to the problem that is the target of the regulation. Third, the agency is concerned about the CFPB’s reliance on the reasonableness test as an option for small entities. Finally, regulation could be problematic for small depository institutions and the consumers, including small businesses, who depend on them.
“There is also no way of knowing if the safe harbor will cover the costs associated with processing late fees at a small institution,” SBA Advocacy said. “If you don’t cover the costs, small warehouses may no longer offer the product to their customers.”