Credit Card Fairness Act
Summary
The Credit Card Fairness Act aims to amend the Truth in Lending Act by codifying a Consumer Financial Protection Bureau (CFPB) rule regarding credit card late fees. It seeks to limit these fees to an amount that is reasonable and proportional to the costs incurred by credit card issuers. The bill specifically targets large credit card issuers, defining them as those with 1,000,000 or more open accounts.
Expected Effects
If enacted, the Credit Card Fairness Act would cap late fees imposed by large credit card issuers at $8, subject to potential increases based on the Consumer Price Index. It also grants the CFPB the authority to adjust this cap and mandates that any legal challenges to the Act be filed in the United States District Court for the District of Columbia.
Potential Benefits
- Reduced Financial Burden: Caps on late fees could alleviate financial strain on consumers, particularly those with lower incomes.
- Increased Transparency: Codifying the CFPB rule provides clarity and predictability regarding late fee amounts.
- Consumer Protection: Limits excessive fees, protecting consumers from potentially predatory practices by large credit card issuers.
- Fairness: Aims to ensure late fees are reasonable and proportional to the actual costs incurred by the issuer.
- CFPB Authority: Reinforces the CFPB's role in regulating financial practices and protecting consumers.
Most Benefited Areas:
Potential Disadvantages
- Reduced Revenue for Issuers: Caps on late fees could decrease revenue for large credit card issuers, potentially leading to adjustments in other fees or interest rates.
- Limited Flexibility: The fixed cap may not account for varying costs incurred by issuers in different circumstances.
- Potential for Unintended Consequences: Issuers might tighten credit standards or reduce rewards programs to offset lost revenue.
- Complexity: The CPI-based adjustment mechanism could introduce complexity and uncertainty.
- Legal Challenges: The venue provision for challenges might concentrate legal action in a single jurisdiction.
Most Disadvantaged Areas:
Constitutional Alignment
The Credit Card Fairness Act appears to align with the Commerce Clause (Article I, Section 8), which grants Congress the power to regulate interstate commerce. Credit card companies operate across state lines, and regulating their fees falls under this power. The Act also delegates rulemaking authority to the CFPB, which is permissible as long as Congress provides clear standards for the agency to follow. The requirement for rulemaking under Section 553 of Title 5 ensures due process.
Impact Assessment: Things You Care About ⓘ
This action has been evaluated across 19 key areas that matter to you. Scores range from 1 (highly disadvantageous) to 5 (highly beneficial).