CFPB credit card late fee proposal ‘more onerous than expected,’ says BTIG

After the CFPB released a proposal that would alter the credit card late fee safe harbor by reducing the cap to $8 from the potential $41 cap currently in place, end the annual inflation adjustment feature and cap late fees at 25% of the minimum payment, BTIG analyst Isaac Boltansky said the proposal "skews toward the worst-case scenario end of the spectrum" in the range of possible outcomes for the credit card industry and is "more onerous than consensus suggested." The proposal, which the CFPB estimates could reduce the aggregate amount of annual credit card late fees to $3B from $12B, "should be viewed as a negative for the whole credit card issuer space," but the "greatest pain" is focused on low-balance lenders like Synchrony (SYF) and Bread Financial (BFH), the firm tells investors. However, BTIG also would expect "an almost immediate legal challenge" if this proposal is finalized without a material softening in the second half of this year.