After the CFPB proposed a new rule that would limit late credit card late fees to $8 per occurrence from the current maximum of $41 or to 25% of the minimum payment requirement, whichever is lower, Citi analyst Arren Cyganovich said the firm’s analysis of 2021 data indicates that Synchrony (SYF) had the highest proportion of late fees as a percentage of revenue at 15%, followed by Capital One (COF) at 5%, Discover (DFS) at 4%, and American Express (AXP) at 2%. Given the higher proportion of late fees at Synchrony, management has been asked for the past several quarters about late fees and has offsets prepared, including agreements in place for retail partners to absorb the changes to regulatory fees on 60% of its pacts, said the firm. Citi, which has a Buy rating on Synchrony shares, would view weakness today as a potential buying opportunity. In addition, the firm would expect the card companies to take actions to reduce the impact of the rule, which Citi warns is likely to create "unintended consequences" that could include reducing credit availability to lower quality customers or raising the interest rates charged on their products.
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