Paul, Weiss Submits Comment Letter on CFPB’s Credit Card Late Fee Rulemaking

Paul, Weiss submitted a comment letter to the Consumer Financial Protection Bureau (CFPB) on the agency’s proposed rule on credit card late fees. The letter, submitted on behalf of several major credit card issuers, details a number of substantive and procedural defects in the proposal and urges the agency to pause the rulemaking and revise its approach.

Credit card issuers incur substantial risk in lending to consumers on an unsecured basis and use late fees as an important risk-mitigation tool. As described in the letter, the CFPB’s proposed $8 late fee safe harbor would dramatically reduce the deterrent value of late fees and remove an important incentive for consumers to pay their bills on time, resulting in increased delinquencies. As the CFPB itself anticipates, this would likely result in increased interest rates and other costs, reduced credit scores for those who pay late more often, and a contraction in access to credit. These impacts would leave a large majority of consumers worse off, including both those who pay on time and those who pay late.

The comment letter was written by Brad Karp, chairman of the firm, and litigation partner Roberto Gonzalez, who previously served as principal deputy general counsel and deputy associate director of the CFPB. The letter is available here.