[Federal Register Volume 87, Number 124 (Wednesday, June 29, 2022)]
[Proposed Rules]
[Pages 38679-38682]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-13864]


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Proposed Rules
                                                Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains notices to the public of 
the proposed issuance of rules and regulations. The purpose of these 
notices is to give interested persons an opportunity to participate in 
the rule making prior to the adoption of the final rules.

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Federal Register / Vol. 87, No. 124 / Wednesday, June 29, 2022 / 
Proposed Rules

[[Page 38679]]



BUREAU OF CONSUMER FINANCIAL PROTECTION

12 CFR Part 1026

[Docket No. CFPB-2022-0039]


Credit Card Late Fees and Late Payments

AGENCY: Bureau of Consumer Financial Protection.

ACTION: Advance notice of proposed rulemaking.

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SUMMARY: In order to support its rulemaking and other functions, the 
Consumer Financial Protection Bureau (Bureau or CFPB) is charged with 
monitoring for risks to consumers in the offering or provision of 
consumer financial products or services, including developments in 
markets for such products or services. As part of this mandate, the 
Bureau is seeking information from credit card issuers, consumer 
groups, and the public regarding credit card late fees and late 
payments, and card issuers' revenue and expenses. For example, the 
Bureau is seeking information relevant to certain provisions related to 
credit card late fees in the Credit Card Accountability Responsibility 
and Disclosure Act of 2009 (CARD Act or the Act) and Regulation Z. 
Areas of inquiry include: factors used by card issuers to set late fee 
amounts; card issuers' costs and losses associated with late payments; 
the deterrent effects of late fees; cardholders' late payment behavior; 
methods that card issuers use to facilitate or encourage timely 
payments, including autopay and notifications; card issuers' use of the 
late fee safe harbor provisions in Regulation Z; and card issuers' 
revenue and expenses related to their domestic consumer credit card 
operations.

DATES: Comments must be received by July 22, 2022.

ADDRESSES: You may submit responsive information and other comments, 
identified by Docket No. CFPB-2022-0039 by any of the following 
methods:
    1. Federal eRulemaking Portal: https://www.regulations.gov. Follow 
the instructions for submitting comments.
    2. Email: <a href="/cdn-cgi/l/email-protection#bf8d8f8d8d92fccddadbd6cbfcdecddbf3decbdaf9dadafef1efedffdcd9cfdd91d8d0c9"><span class="__cf_email__" data-cfemail="60525052524d231205040914230112042c011405260505212e303220030610024e070f16">[email protected]</span></a>. Include Docket No. 
CFPB-2022-0039 in the subject line of the message.
    3. Mail/Hand Delivery/Courier: Comment Intake--Credit Card Late 
Fees, Consumer Financial Protection Bureau, 1700 G Street NW, 
Washington, DC 20552. Please note that due to circumstances associated 
with the COVID-19 pandemic, the Bureau discourages the submission of 
comments by hand delivery, mail, or courier.
    Instructions: The Bureau encourages the early submission of 
comments. All submissions must include the document title and docket 
number. Because paper mail in the Washington, DC area and at the Bureau 
is subject to delay, commenters are encouraged to submit comments 
electronically. In general, all comments received will be posted 
without change to https://www.regulations.gov. In addition, once the 
Bureau's headquarters reopens, comments will be available for public 
inspection and copying at 1700 G Street NW, Washington, DC 20552, on 
official business days between the hours of 10 a.m. and 5 p.m. Eastern 
time. At that time, you can make an appointment to inspect the 
documents by telephoning 202-435-7275.
    All submissions in response to this notice, including attachments 
and other supporting materials, will become part of the public record 
and subject to public disclosure. Proprietary information or sensitive 
personal information, such as account numbers or Social Security 
numbers, or names of other individuals, should not be included. 
Submissions will not be edited to remove any identifying or contact 
information.
    If you wish to submit trade secret or confidential commercial 
information, please contact the individuals listed in the FOR FURTHER 
INFORMATION CONTACT section below. Information that the submitter 
customarily and actually keeps private will be treated as confidential 
in accordance with the Bureau's Rule on the Disclosure of Records and 
Information, 12 CFR part 1070.

FOR FURTHER INFORMATION CONTACT: Adrien Fernandez, Counsel, Krista 
Ayoub and Steve Wrone, Senior Counsels, Office of Regulations, at 202-
435-7700. If you require this document in an alternative electronic 
format, please contact <a href="/cdn-cgi/l/email-protection#45060315071a0426262036362c272c292c313c05262335276b222a33"><span class="__cf_email__" data-cfemail="1c5f5a4c5e435d7f7f796f6f757e75707568655c7f7a6c7e327b736a">[email protected]</span></a>.

SUPPLEMENTARY INFORMATION:

I. Background

    In order to support its rulemaking and other functions, the Bureau 
is charged with monitoring for risks to consumers in the offering or 
provision of consumer financial products or services, including 
developments in markets for such products or services. As part of this 
mandate, the Bureau is seeking information from credit card issuers, 
consumer groups, and the public regarding credit card late fees and 
late payments and card issuers' revenue and expenses. For example, the 
Bureau is seeking information relevant to certain provisions related to 
late fees in the CARD Act \1\ and Regulation Z.\2\
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    \1\ Credit Card Accountability Responsibility and Disclosure Act 
of 2009 (CARD Act), Public Law 111-24, 123 Stat. 1734 (2009).
    \2\ 12 CFR part 1026.
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    Specifically, section 149(a) of the CARD Act provides that the 
amount of any penalty fee or charge that a card issuer may impose with 
respect to a credit card account under an open-end consumer credit plan 
in connection with any omission with respect to, or violation of, the 
cardholder agreement, including any late payment fee, over-the-limit 
fee, or any other penalty fee or charge, must be reasonable and 
proportional to such omission or violation.\3\ Section 149(b) of the 
Act directs the Bureau \4\ to issue rules that establish standards for 
assessing whether the amount of any penalty fee or charge is reasonable 
and proportional to the omission or violation to which the fee or 
charge relates.\5\ In issuing such rules, the Act requires the Bureau 
to consider: (1) the cost incurred by the creditor from an omission or 
violation; (2) the deterrence of omissions or violations by the 
cardholder; (3) the conduct of the cardholder; and (4) such other 
factors as the Bureau may deem necessary or appropriate. The Act

[[Page 38680]]

authorizes the Bureau to establish different standards for different 
types of fees and charges, as appropriate.\6\ Finally, the Act 
authorizes the Bureau in consultation with other agencies to provide an 
amount for any penalty fee or charge that is presumed to be reasonable 
and proportional to the omission or violation to which the fee or 
charge relates.\7\
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    \3\ 15 U.S.C. 1665d(a).
    \4\ The Dodd-Frank Act, which became law on July 21, 2010, 
established the Bureau and, one year later, transferred authority 
and responsibility for implementing and enforcing the CARD Act from 
the Board to the Bureau.
    \5\ 15 U.S.C. 1665d(b).
    \6\ 15 U.S.C. 1665d(d).
    \7\ 15 U.S.C. 1665d(e).
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    Section 149(a) and (b) of the CARD Act is implemented in part in 
Regulation Z, Sec.  1026.52(b)(1). In particular, under Sec.  
1026.52(b)(1), a card issuer must not impose a fee for violating the 
terms or other requirements of a credit card account, including a late 
payment, unless the issuer has determined that the dollar amount of the 
fee represents a reasonable proportion of the total costs incurred by 
the issuer for that type of violation consistent with Sec.  
1026.52(b)(1)(i) or complies with the safe harbor amounts consistent 
with Sec.  1026.52(b)(1)(ii).\8\ Currently, Sec.  1026.52(b)(1)(ii) 
sets forth a safe harbor of $30 generally for a late payment, except 
that it sets forth a safe harbor of $41 for each subsequent late 
payment within the next six billing cycles. The safe harbor dollar 
amounts in Sec.  1026.52(b)(1)(ii) are subject to an annual inflation 
adjustment.\9\ A card issuer is not required to use the cost analysis 
in Sec.  1026.52(b)(1)(i) to determine the amount of late fees if it 
complies with the safe harbor amounts in Sec.  1026.52(b)(1)(ii).\10\
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    \8\ The provisions in Sec.  1026.52(b)(1) apply to penalty fees 
generally, including late fees. See comment 52(b)-1. Other 
restrictions on the amount of penalty fees, including late fees, are 
set forth in Sec.  1026.52(b)(2). For example, Sec.  
1026.52(b)(2)(i)(A) prohibits a card issuer from imposing a late fee 
that exceeds the amount of the required minimum periodic payment due 
immediately prior to assessment of the late payment fee. Comment 
52(b)(2)(i)-1.
    \9\ 12 CFR 1026.52(b)(1)(ii)(D).
    \10\ See comment 52(b)(1)-1.i.A.
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    The questions in this notice cover several areas relating to the 
forgoing statutory and regulatory provisions, as well as areas relating 
more generally to the domestic consumer credit card market. Areas of 
inquiry include: factors used by card issuers to set late fee amounts, 
including but not limited to the statutory factors described above; 
card issuers' costs and losses associated with late payments; the 
deterrent effects of late fees; cardholders' late payment behavior; 
methods that card issuers use to facilitate or encourage timely 
payments, including autopay and notifications; card issuers' use of the 
late fee safe harbor provisions in Regulation Z, Sec.  
1026.52(b)(1)(ii); and card issuers' revenue and expenses related to 
their domestic consumer credit card operations. In answering the 
questions below, card issuer commenters should base their answers on 
information relevant to their domestic consumer credit card portfolios. 
Other commenters should base their answers on information they have 
about the domestic consumer credit card market.

II. Questions

A. Factors Used by Card Issuers To Set Existing Levels of Late Fees

    1. For late fees assessed to cardholders who were not previously 
assessed a late fee in at least one of the previous six billing cycles, 
what factors do card issuers use to determine the amount of the late 
fee to charge per incident? For card issuer commenters, please list and 
describe factors that you consider in determining the late fee amount 
to charge per incident including:
    a. Whether, and if so how, you determine that the late fee amount 
is proportionate or otherwise related to the cost you incur from a late 
payment;
    b. Whether, and if so how, you determine that the late fee amount 
is proportionate or otherwise related to the statement balance or 
amount of the required minimum payment (beyond the restrictions in 
Sec.  1026.52(b)(2));
    c. Whether, and if so how, you take into account the number of late 
fees you estimate you would be unable to collect;
    d. Whether, and if so how, you determine the late fee amount based 
on annual revenue goals;
    e. Whether, and if so how, you take into account information 
related to whether and to what degree the amount of a late fee deters 
future late payments or other violations; and
    f. Whether, and if so how, you take into account any other factors.
    2. For late fees assessed to cardholders who were previously 
assessed a late fee in at least one of the previous six billing cycles, 
what factors do card issuers use to determine the amount of the late 
fee to charge per incident? For card issuer commenters, please list and 
describe factors you consider in determining the late fee amount to 
charge per incident including:
    a. Whether, and if so how, you determine that the late fee amount 
is proportionate or otherwise related to the cost you incur from a late 
payment;
    b. Whether, and if so how, you determine that the late fee amount 
is proportionate or otherwise related to the statement balance or the 
amount of the required minimum payment (beyond the restrictions in 
Sec.  1026.52(b)(2));
    c. Whether, and if so how, you take into account the number of late 
fees you estimate you would be unable to collect;
    d. Whether, and if so how, you determine the late fee amount based 
on annual revenue goals;
    e. Whether, and if so how, you take into account information 
related to whether and to what degree the amount of a late fee deters 
future late payments or other violations; and
    f. Whether, and if so how, you take into account any other factors.

B. Costs and Losses

    3. What types of costs are associated with credit card late 
payments? For card issuer commenters, please provide an itemization of 
the annual amounts in 2019, 2020, and 2021 aggregated for your domestic 
consumer credit card portfolios for the following categories:
    a. Costs associated with notifying (other than through periodic 
statements) cardholders of delinquencies and resolving delinquencies 
(including the establishment of workout and temporary hardship 
arrangements) prior to charge-off, including payments to third-party 
debt collectors;
    b. Costs associated with notifying (other than through periodic 
statements) cardholders of delinquencies and resolving delinquencies 
(including the establishment of workout and temporary hardship 
arrangements) post-charge-off, including payments to third-party debt 
collectors;
    c. Charges to the card issuer by other third parties as a result of 
late payment;
    d. Losses due to non-payment;
    e. Costs associated with holding reserves against potential losses; 
and
    f. Costs of funding delinquent accounts.
    4. What is the amount of costs associated with a single additional 
late payment? For card issuer commenters, please list, describe, and 
report the amount of marginal costs associated with a single additional 
late payment incurred by you. For card issuer commenters, please also 
list, describe, and report the amount of average costs associated with 
collecting late payments. Please distinguish between pre-charge-off and 
post-charge-off costs when appropriate, and exclude losses due to non-
payment, costs associated with holding reserves, and costs of funding 
delinquent accounts.
    5. Please list and describe actions and methods through which a 
card issuer typically contacts cardholders about late payments (other 
than through periodic statements). For card issuer

[[Page 38681]]

commenters, please report the general number of calendar days after the 
due date after which you typically undertake the following actions if 
the minimum payment is not received:
    a. Contact cardholder about late payment (other than through 
periodic statements) prior to charging a late fee;
    b. Contact cardholder about late payment (other than through 
periodic statements) after charging a late fee;
    c. Report late payment to credit bureaus;
    d. Initiate collection actions via first-party debt collection;
    e. Initiate collection actions via third-party debt collection; and
    f. Any other actions taken specifically with respect to collecting 
late payments.
    6. How many late payments does a card issuer typically experience 
in a year, as a total and relative to the number of accounts? For card 
issuer commenters, please report the annual number of late payments 
experienced by you in 2019, 2020, and 2021, as a total per year, and 
also as a fraction of the number of accounts per year.
    7. How many late fees does a card issuer typically assess in a 
year, as a total and as relative to the number of accounts? For card 
issuer commenters, please report the annual number of late fees 
assessed by you in 2019, 2020, and 2021, as a total per year, and also 
as a fraction of the number of accounts per year.
    8. For card issuer commenters, for each of the following categories 
separately, please report the annual number in 2019, 2020, and 2021, as 
a total per year and relative to the number of accounts per year, of:
    a. Late fees that you were not able to collect and whether these 
uncollectible amounts are more common for the first versus subsequent 
late fee charges; \11\
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    \11\ Please do not include fees that you chose not to impose or 
chose not to collect (such as fees you chose to waive at the request 
of the cardholder or under a workout or temporary hardship 
arrangement).
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    b. Late fees that were discharged in bankruptcy; and
    c. Late fees that you were required to waive in order to comply 
with a legal requirement (such as a requirement imposed by Regulation Z 
or 50 U.S.C. app. 527).

C. Deterrence

    9. Do card issuers, consumer groups, or the general public have any 
research or information related to whether and to what degree the 
amount of a late fee, including the higher safe harbor amount set forth 
in Sec.  1026.52(b)(1)(ii)(B), does or does not deter future late 
payments and whether the deterrent effect differs for the first versus 
subsequent late payments? If so, please provide that research or 
information.
    10. Do card issuers typically impose consequences other than late 
fees on cardholders for paying late? If so, what other consequences are 
generally imposed on cardholders for paying late? Do card issuers, 
consumer groups, or the general public have any research or information 
on how effective these other consequences are at deterring late 
payments? If so, please provide that research or information. When are 
these other consequences generally imposed? For card issuer commenters, 
please report the general number of calendar days after the due date 
after which the following actions typically will occur if the minimum 
payment is not received:
    a. Lose grace period \12\ on new transactions;
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    \12\ The grace period is the date by which or the period within 
which any credit extended may be repaid without incurring a finance 
charge due to a periodic interest rate.
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    b. Revise upward purchase APRs on new transactions because of late 
payments that were not more than 60 days late;
    c. Revise upward purchase APRs on new transactions and existing 
balance because of late payments that were more than 60 days late;
    d. Lose benefits such as rewards; and
    e. Any other consequences.
    11. Are there other methods that card issuers typically use to 
deter late payments that are less costly to cardholders than late fees 
or the consequences listed above? If so, what are those methods? (See 
also questions below related to auto pay and notifications of an 
upcoming payment.)

D. Cardholder Behavior

    12. What categories do card issuers use to classify cardholders 
based on their late payment behavior (e.g., cardholders who (1) 
inadvertently forgot to pay; versus (2) cardholders who did not have 
the funds to pay by the due date)? For card issuer commenters, please 
provide data on what share of cardholders that pay late fall within 
each of these categories, or other typical classifications.
    13. For card issuer commenters, please provide data on how many 
calendar days after the due date cardholders make at least the minimum 
payment that is late. Please indicate to what percent of accounts is at 
least the minimum payment received and credited within:
    a. Less than 24 hours;
    b. 2-5 days;
    c. 6-10 days;
    d. 11-15 days;
    e. 16-30 days; and
    f. 31 days or more.
    14. Is there other cardholder conduct the Bureau should consider in 
evaluating potential changes to the safe harbor provisions in Sec.  
1026.52(b)(1)(ii)? If so, what is the other conduct and how should the 
Bureau consider it?

E. Autopay

    15. Do most card issuers currently offer autopay? For card issuers 
that currently offer autopay, please describe the process that a 
cardholder must go through in order to enroll in autopay and any 
restrictions that you may place on the autopay feature (i.e., the 
feature is only available to certain cardholders).
    16. For card issuers that currently offer autopay, what is the 
current rate of cardholder enrollment?
    17. For card issuers that currently offer autopay, are any benefits 
offered to cardholders to incentivize autopay enrollment?
    18. What, if any, are the consumer-related concerns associated with 
cardholders' use of autopay? Do card issuers consider these concerns 
when determining whether to provide autopay or incentivize its use, and 
if so, how?
    19. What are the benefits to card issuers of making autopay 
available to cardholders?

F. Notifications of Upcoming Due Date

    20. Please list and describe actions and methods through which card 
issuers contact cardholders about an upcoming due date (other than 
through periodic statements). For card issuers that provide 
notifications about upcoming due dates (other than through periodic 
statements), do you require cardholders to opt in to these 
notifications or are all notifications of this type automatic for every 
cardholder?
    21. For card issuers that provide notifications about upcoming due 
dates (other than through periodic statements), in the months after a 
cardholder is charged a late fee, do you change the frequency or method 
by which you communicate with cardholders that a payment due date is 
upcoming? If so, how long are these changes in effect?

G. Courtesy Periods and Fee Waivers <SUP>13</SUP>
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    \13\ For the purposes of this section, a ``courtesy period'' 
refers to a policy or practice of a time period after the due date 
in which a late fee will not be assessed if at least the minimum 
payment is received and credited to the account during that time 
period, even if the terms of the account agreement provide that the 
card issuer may assess a late payment fee by a certain date.
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    22. Do any card issuers currently offer courtesy periods before 
late fees are

[[Page 38682]]

assessed? For card issuers that offer courtesy periods, how many days 
is the courtesy period? Are there any restrictions associated with the 
courtesy period (i.e., courtesy periods are only available to certain 
cardholders)?
    23. Do any card issuers waive late fees if a cardholder contacts 
the issuer? If so, for card issuers that waive late fees, under what 
circumstances are late fees waived?

H. Staggered Late Fee

    24. Do any card issuers currently offer staggered late fees (i.e., 
a small dollar amount fee, such as $2-3, that is imposed no more often 
than every certain number of days, such as every 5 or 10 days)? For 
card issuers that offer staggered late fees, describe the structure and 
how the fee amounts and number of days between fee escalations were 
decided.

I. Safe Harbor Provisions

    25. Other than the statutory factors listed in the CARD Act, are 
there other factors the Bureau should consider in evaluating potential 
changes to the safe harbor provisions in Sec.  1026.52(b)(1)(ii)? If 
so, what are these other factors and how should the Bureau consider 
them?
    26. For card issuer commenters, if you assess a late fee that is 
lower or greater than the current safe harbor amounts set forth in 
Sec.  1026.52(b)(1)(ii), please describe why the safe harbor amount is 
not being charged and how you arrived at the amount charged.
    27. What late fee safe harbor amount would be sufficient for 
purposes of allowing card issuers to recover, through late fees, their 
costs in collecting late payments?
    28. Do card issuers incur higher costs when collecting late 
payments where a prior late payment occurred in the past six billing 
cycles (repeat late payments) relative to the costs of collecting late 
payments where there has not been a late payment in the prior six 
billing cycles? Please include any research or information relating to 
whether and to what degree the costs associated with repeat late 
payments differ from the costs associated with late payments where 
there has not been a late payment in the prior six billing cycles.
    29. What potential changes to the safe harbor provisions, if any, 
would cause card issuers to no longer use the safe harbor provisions in 
determining the amount of late fees? In lieu of using the safe harbor 
provisions, would card issuers use the cost analysis in Sec.  
1026.52(b)(1)(i) to determine the amount of late fees?
    30. Should the Bureau consider any alternative approaches to the 
cost analysis in Sec.  1026.52(b)(1)(i) to determine the amount of late 
fees if the card issuer decides not to use the safe harbor provisions 
for determining late fees amounts?

J. Cost Analysis Provisions

    31. Are any card issuers currently using the cost analysis 
provisions in Sec.  1026.52(b)(1)(i) to set the amount of the late fees 
they charge? For card issuers that are using the cost analysis 
provisions, what is the amount of the late fees you charged in 2019, 
2020, and 2021 based on this analysis?
    32. For card issuer commenters, if you were to undertake the cost 
analysis described in Sec.  1026.52(b)(1)(i) in determining the amount 
of the late fees you could charge, what would the late fee amount be? 
Please provide detailed information about the information you used to 
determine this late fee amount.
    33. Would card issuers need additional detail on how to comply with 
the cost analysis provisions in Sec.  1026.52(b)(1)(i) beyond what is 
currently provided in the commentary? \14\ If so, what additional 
details are needed?
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    \14\ See commentary to Sec.  1026.52(b)(1)(i) for existing 
details on the cost-analysis provisions under Sec.  
1026.52(b)(1)(i).
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    34. If the Bureau were to require card issuers to comply with the 
cost analysis provisions in Sec.  1026.52(b)(1)(i) in determining the 
amount of the late fees they could charge, what additional process and 
procedures should the Bureau adopt, if any, to ensure that card issuers 
comply with these provisions?

K. Revenue and Expenses

    35. For card issuer commenters, please itemize the types of revenue 
associated with your domestic consumer credit card operations and 
report overall annual revenue in 2019, 2020, and 2021 associated with 
your domestic consumer credit card operations, including the itemized 
annual income from the following categories:
    a. Interest;
    b. Fees;
    c. Interchange revenue; and
    d. Other income.
    36. For card issuer commenters, please report revenue from late 
fees collected on your domestic consumer credit card accounts in 2019, 
2020, and 2021. Please do not include any fee waived or reversed as 
uncollectible or any amount added to a contra-asset account for 
uncollectible fees that the bank maintains and reports separately from 
the allowance for loan and lease losses.
    37. For card issuer commenters, please itemize the types of 
expenses associated with your domestic consumer credit card operations 
and report the overall annual expenses accrued in 2019, 2020, and 2021 
associated with domestic consumer credit card operations, including the 
itemized annual expenses for the following categories:
    a. The total interest expenses accrued to fund credit card 
receivables;
    b. The interchange expense fees paid to the card associations;
    c. Expenses to collect problem credit (including the total 
collection cost for delinquent, recovery, and bankrupt accounts);
    d. Marketing expenses (including payments to retail partners); and
    e. All other operating and other expenses associated with card 
operations such as servicing, cardholder billing, processing, 
interchange, processing payments, card issuing, authorizations, card 
administration, and outside services/outsourcing expenses, etc.
    38. For card issuer commenters, please report the dollar amount of 
losses in 2019, 2020, and 2021 for your domestic consumer credit card 
portfolios.

Rohit Chopra,
Director, Consumer Financial Protection Bureau.
[FR Doc. 2022-13864 Filed 6-28-22; 8:45 am]
BILLING CODE 4810-AM-P


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