Tirzah Duren, the vice president of policy and research at the American Consumer Institute (ACI), said the Consumer Financial Protection Bureau’s (CFPB) recently proposed rules on “junk fees” would harm consumers.
“Some so-called ‘junk fees,’ like late fees, serve an economic purpose and encourage responsible financial behavior,” Duren told American Credit News. “When limits are placed on these fees, it doesn't protect consumers, rather it forces both those who do pay on time and lenders to bear the costs.”
“Far from consumer protection, which should be the agency's focus, it would harm all consumers,” Duren said. “It would also lead to other consumers paying more to cover delinquent payers. That's financially irresponsible.”
Duren also late fees also allow financial institutions to recoup costs lost when credit cards aren’t paid on time. Without late fees, these institutions might end up tightening their lending criteria, which would reduce access to credit.
The CFPB announced on March 5 a new rule that would cap late fees at $8 for credit card companies with more than 1 million open accounts.
ACI President Steve Pociask, said in a statement the new rule would “constrain access to credit, particularly for new and low-income consumers” and that credit card companies would “be forced to strengthen their lending standards, making it harder for at-risk population segments to obtain credit.”
ACI is a non-profit think tank headquartered in Washington, D.C. It focuses on consumer welfare, regulation, and public policy issues, particularly in telecommunications, energy, and healthcare sectors. Established in 1999, ACI conducts research, publishes reports, and advocates for policies that promote competition, innovation, and consumer choice. It receives funding from various sources, including corporations, foundations, and individuals. ACI's work often involves analyzing regulatory proposals and their potential impacts on consumers and markets.
The CFPB was established in 2011 following the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act. It operates as an agency of the United States government with the primary mission to enforce federal consumer financial laws and protect consumers in the financial sector. The CFPB's jurisdiction encompasses banks, credit unions, securities firms, payday lenders, mortgage-servicing operations, foreclosure relief services, debt collectors, and other financial companies operating in the United States.