"Consumer Financial Protection Bureau Caves on Introductory Credit Card Fees"
Published on Friday, April 13, 2012 by Common Dreams
Consumer Financial Protection Bureau Caves on Credit Card Fees
Credit card companies win battle over introductory fees
- Common Dreams staff
The Consumer Financial Protection Bureau has decided not to challenge credit card companies on introductory fees. Credit card companies had been more aggressive in charging fees to users before they use a credit card, ever since new regulations made it so they could no longer charge more than 25 percent of the total credit limit in standard fees.
Richard Cordray, of the Consumer Financial Protection Bureau. (Mike Wilson/Getty) The CFPB originally proposed regulations to eliminate the introductory fees, but on Thursday relented and decided not to pursue the matter.
Consumer advocate groups expressed discontent over the decision, and what it says about the possibility of the CFPB as a sufficient consumer watchdog of financial products.
“Even if it is a small rule, it affects the most vulnerable of consumers — consumers with impaired credit records, often of limited means, who end up with these expensive fee-harvester cards,” said Chi Chi Wu, a lawyer at the National Consumer Law Center, told the New York Times. “Exactly the sort of consumers that we think CFPB. should stand strongest for.”
* * *
NY Times: Consumer Bureau Declines to Resist Upfront Credit Card Fees
In one of the first tests of its willingness to show its muscle, the new agency created to protect consumers declined on Thursday to put up a fight.
The agency, the Consumer Financial Protection Bureau, introduced a proposal that would make it easier for credit card issuers to charge fees before borrowers’ accounts were officially open.
The bureau, which began overseeing many consumer financial products last year, said it was issuing the proposed rule in response to a federal court decision that challenged how the Credit Card Act was being applied. The act, which took effect in February 2010, put several rules in place aimed at curbing abusive lending practices.
Part of the new law said that credit card issuers could not charge fees equal to more than 25 percent of the borrower’s credit limit in the first year after the account was opened. But after certain credit card issuers started charging application or processing fees before consumers’ accounts were opened, the Federal Reserve expanded the rule so that the fee limit would also apply to those upfront charges. That’s the piece of the rule that the consumer protection agency, which has since assumed regulatory authority, is proposing to eliminate.
The bureau declined to say why it took this course. But some consumer advocates said they believed that the consumer agency, led by Richard Cordray, may be backing down because it has decided to “pick its battles,” while trying to show that it is not unfriendly to business.
http://www.commondreams.org/headline/2012/04/13-7
