NAFCU Regulatory Alert; Late Payment Fees

Posted by Anthony Demangone

NAFCU Members: NAFCU has released a Regulatory Alert that provides an overview and seeks comment regarding the Federal Reserve's recent proposal concerning "reasonable and proportional" credit card penalty fees and the reevaluation of APR increases for credit card accounts.  Members can access it here.   (It is the alert all the way at the top.)

I think this proposal is a fairly big deal, so I urge you to review the Alert and comment.  Not a member? I wrote generally about the proposal on the blog a few weeks ago.  I fear the rule will put pressure on your credit card fee income and very well may reduce interest income for your credit card portfolio.  Come hoo-hoo or high water, the Fed is under the gun to have a final rule that will take effect on August 22, 2010.  

Case in point: look at this section of the proposal's preamble.  It should give you a good glimpse of how this rule may cause severe heartburn for compliance officers. 

1. Dollar Amount Associated With Late Payments

Proposed comment 52(b)(2)(i)–1 would clarify that the dollar amount associated with a late payment is the amount of the required minimum periodic payment that was not received on or before the payment due date. Thus, § 226.52(b)(2)(i)(A) prohibits a card issuer from imposing a late payment fee that exceeds the amount of the required minimum periodic payment on which that fee is based. For example, a card issuer would be prohibited from charging a late payment fee of $39 based on a consumer’s failure to make a $20 required minimum periodic payment by the payment due date.

Did that get your attention? If so, please read the proposal or the NAFCU Regulatory Alert.  

Comments

[Diane Hatcher]

If we lower the late fee, and eliminate the overlimit fee, are we required to give our cardholders a 45 day notice of change? I don't think so, but I wanted to double verify.