In the latest of a series of moves to reduce ”junk fees” from banking products, the CFPB has announced new regulation to reduce credit card late fees to a maximum of $8, without higher late fee safe harbor amounts for subsequent violations. While this regulation will only apply to card issuers with greater than 1 million credit cards at this time, this regulation will lead to large reductions in approval rates, especially for subprime borrowers, and reduce the profitability of existing card portfolios. In this white paper, we analyzed the proposed regulation by looking at (1) Historical precedent and the current landscape of late fees in the U.S., (2) a case study simulating the impact of proposals on a subprime credit card portfolio, and (3) a walk through of the impacts this regulation will have on the back book.
March 7, 2024 Download