As discussed here, on February 1, the Consumer Financial Protection Bureau (CFPB) proposed a rule that would amend Regulation Z to: 1) decrease the safe harbor for credit card late fees to $8 and eliminate altogether a higher safe harbor amount for subsequent late payments; 2) eliminate the annual inflation adjustments for the late fee safe harbor amount; and 3) mandate that late fees must not exceed 25% of the required minimum payment. Today, that proposed rule was published in the Federal Register.

In addition to the three proposed amendments, the CFPB is soliciting comment on whether card issuers should be prohibited from imposing late fees on consumers that make the required payment within 15 days of the due date, and whether, as a condition of using the safe harbor, it may be appropriate to require card issuers to offer automatic payment options (such as for the minimum payment amount), and/or to provide notification of the payment due date within a certain number of days prior to the due date.

Interested parties may submit comments on the proposed rule until May 3, 2023.

Given that this proposed rule, if finalized, would likely have a directly adverse effect on the bottom line of credit card issuing banks, we expect the discussion and commentary on this proposed rule to be robust.