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CFPB credit card fee rule could hit Bread, Synchrony

Jan 29, 2024
Illustration of a stack of money wrapped up in a terms and conditions document.

Illustration: Aïda Amer/Axios

The Consumer Financial Protection Bureau is expected imminently to publish a final rule lowering maximum credit card late fees.

Why it matters: Late fees brought companies $14.5 billion in revenue in 2022, but some companies stand to be more heavily affected than others.

Context: The CFPB, which awaits an existential Supreme Court decision, has sought to curb fees across the board. According to the agency, credit card companies charged a record-high $130 billion in interest in fees in 2022.

  • The rule would lower fees from as high as $41 per violation to $8.
  • The CFPB has also targeted overdraft fees and other junk fees, so the Supreme Court case appears to have done little to slow the agency's pace.

What they're saying: "Who is most impacted if the late fee rule ultimately goes through? Bread Financial and Synchrony Financial," a group of Morgan Stanley analysts led by Jeffrey Adelson wrote in a note this month.

  • The group estimates that Bread's earnings per share could be lowered by 80% a year after the rule's implementation. Synchrony could face a 60% hit, and Capital One could face a 27% knockdown.

Between the lines: Expect a fight.

  • "Our expert believes the courts will shoot down the rule on procedural elements," the analysts write. "After, the CFPB could simply repropose a new late fee rule that addresses the procedural issues that had held it up in the courts.

Of note: Some consumer groups have also pushed for regulators to treat BNPL the same as credit cards — including caps on penalty fees.

  • The CFPB's March study on Affirm, Afterpay, Klarna, PayPal and Zip noted that three of those companies charged late fees. Two of the three had, as of 2021, capped their fees at or below $8 per missed payment.
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