February 2, 2023 

CFPB Proposes to Overturn Longstanding Credit Card Late Fee Safe Harbor

Despite strong objections from the banking industry, the Consumer Financial Protection Bureau has proposed to eliminate a longstanding safe harbor that banks of all sizes rely upon when setting late fees on credit card payments.

Citing “excessive credit card late fees,” the CFPB is proposing to amend Regulation Z, which implements the Truth in Lending Act, to better ensure that late fees charged on credit card accounts are “reasonable and proportional” to the late payment as required under TILA. The proposal would do the following.

• cut the safe harbor dollar amount for late fees from $30 to $8 and eliminates a higher safe harbor dollar amount for late fees for subsequent violations of the same type
• eliminate the annual inflation adjustment for the safe harbor amount that was provided by the Federal Reserve Board in 2010
• cap late fee amounts at 25% percent of the required payment

“This proposal harms consumers because it reduces competition among providers and limits consumers’ access to credit,” said MBA President Jackson Hataway. “Many community banks would be forced to eliminate their credit card offerings to customers if there’s a reduction in the late fee safe harbor.”

MBA staff is reviewing the proposal. Comments on the proposal must be submitted by Monday, April 3.

Make Your Voice Heard at NextGen Day

Join with bankers from around the state for MBA’s NextGen Day at the Capitol on Wednesday, Feb. 15.

Designed specifically for members of Next Generation in Banking, this event provides an opportunity for NextGen members to participate in Missouri’s legislative process through the Target Banker program.

NextGen Day at the Capitol begins with a briefing with MBA staff at MBA’s office. Staff will then accompany bankers to the Capitol for their meetings with senators and representatives. After the meetings, bankers will return to MBA’s office for lunch and a review of the day’s events.

“This is your opportunity to learn about the legislative process, get to know your lawmakers and have your voice heard as you take part in MBA’s state advocacy efforts,” said MBA Vice President Emily Lewis. “The more bankers participate, the more it amplifies our message to lawmakers.”

This session, MBA is fighting back against a credit union bill that would allow a massive expansion to the current field of membership law.

“Bankers need to express their opposition on this measure,” Lewis said. “It’s vital that lawmakers hear directly from you, their constituents, about how this legislation has detrimental effects for your customers and communities.”

MBA Releases New Edition of Titling Accounts Manual

The newly updated Titling Accounts Manual from MBA provides guidance on titling and managing deposit accounts, specifically for Missouri banks. Now in its fifth edition, the manual includes revised sample forms and new material.

“This is our most popular manual,” said MBA Senior Vice President Carol Barnett. “It is widely used by customer service representatives, operations officers and other bank personnel.”

The manual was originally written by attorney Michael W. Forster and has been updated by attorney Mara J. Lahnar, a partner with Mickes O’Toole LLC in St. Louis. It is available either as a printed book or electronically. Electronic access is available on a bank-wide basis for MBA members, based on bank asset size. Ordering information is available online.

MO Reps to Chair U.S. House Financial Subcommittees

The House Financial Services Committee announced the member assignments for its six subcommittees. As previously reported by MBA, Reps. Blaine Luetkemeyer and Ann Wagner are chairing two of those committees while Rep. Emanuel Clever was recently named to the committee.

• The Subcommittee on Capital Markets is chaired by Wagner, and Cleaver is a member of this subcommittee.
• The Subcommittee on National Security, Illicit Finance and International Financial Institutions is chaired by Luetkemeyer.
• Cleaver is the ranking member of the Subcommittee on Housing and Insurance.
• Luetkemeyer is a member of Subcommittee on Financial Institutions and Monetary Policy.
• Wagner is a member of the Subcommittee on Oversight and Investigations.

Fed Raises Rates by 25 Basis Points

The Federal Open Market Committee announced it would raise the target range for the federal funds rate by 25 basis points to 4.5% to 4.75%. The decision marked the eighth consecutive increase in the rate, although the committee’s more recent rate hikes have ranged from 50 to 75 basis points.

In a statement, the FOMC noted inflation had eased somewhat “but remains elevated.” It cautioned that committee members anticipate that further rate hikes will be needed to lower inflation to the Fed’s 2% target range.

Fed Chairman Jerome Powell said in a news conference that he does not expect the FOMC to lower rates this year.

“Our focus is not on short-term moves but on sustained changes to broader financial conditions,” Powell said. “And it is our judgment that we’re not yet at a sufficiently restrictive policy stance, which is why we say that we expect ongoing hikes will be appropriate.”

Powell added he was optimistic that inflation could be brought under control without significant economic pain.

“My base case is that the economy can return to 2% inflation without a really significant downturn or a really big increase in unemployment,” he said. “I think that’s a possible outcome. I think many forecasters would say it’s not the most likely outcome, but I would say there’s a chance.”

The FOMC meets again March 21-22.