April 23, 2012
In a Twist, CFPB Rule Favors Credit Card Companies Over Consumers
How's this for irony? The Consumer Financial Protection Bureau, which has aggressively pursued questionable practices by credit card companies, has now issued rulemaking that may benefit them at the expense of customers.
The Bureau has formally amended a 2011 rule the Federal Reserve Board issued on credit card fees. A federal court ruling last year granted a preliminary injunction to block a part of it from taking effect, in response to a lawsuit brought by First Premier Bank, a credit card issuer, over the total fees a consumer could be asked to pay prior to opening an account.
The Credit Card Accountability Responsibility and Disclosure Act of 2009 (CARD Act) limited fees charged during the first year after the account is opened to 25 percent of the account's initial credit limit. For example, if the credit limit is $400, fees charged during the first year after the account is opened were capped at $100. The Federal Reserve Board extended this limitation to fees that a consumer must pay prior to opening an account, such as an application fee, prompting First Premier's lawsuit.
Following the injunction, authority to implement the CARD Act transferred to the CFPB, which issued an April 2012 proposal to make the rule consistent with the lawsuit's demands. The resulting final rule adopts the proposal's elimination of the cap on fees charged prior to account opening.
Among the nearly 50 comment letters received in advance of the final rule, consumer advocates, including the New York Attorney General's office, fretted that the change would “reduce protections for vulnerable consumers,” the CFPB said. Options it considered, but chose not to pursue, included additional rulemaking to specifically limit account opening fees.
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