WASHINGTON — Rep. Andy Barr, R-Ky., is asking the Government Accountability Office to study the impact of the Consumer Financial Protection Bureau's credit card late fee proposal, according to a letter obtained by American Banker.
The request is the latest iteration of a dynamic in which retail and payments lobbyists fight for the narrative on a number of credit card-related proposals and laws, including the CFPB's attempt t
Barr, in the letter to the GAO, called the CFPB rule a "thinly veiled move to shift incidence of the costs to creditors of late payments to innocent consumers." The proposal slashes late fees from the current $30 for the first fee and $41 for each subsequent missed payment, a potential fivefold drop, that the CFPB estimates would save consumers up to $9 billion a year.
"Even the frequent late payers, which this proposed rule purports to help, will ultimately be harmed over the long term. Reducing the penalty and deterrence for frequent late payers who do not pay their credit card bills will result in higher credit card balances, larger consumer debt loads, and damage to consumers' longer-term credit histories," Barr said.
Many Republicans and the payments industry say that those costs will be put on consumers instead.
"The long-term costs and impacts to consumers of this rulemaking are unclear at best and likely harmful," Barr said in the letter. "The rule departs from traditional risk-based pricing practices required by prudential regulators, almost certainly resulting in a higher cost of credit and reduced credit access for consumers who pay their bills on time."
In these battles more broadly, both sides are trying to convince key lawmakers that taking steps with credit card issuers would either help or hurt consumers. The rhetoric has become more pointed this year since inflation became a major worry among voters.
These same arguments are being used, for example, in the conflict between payment providers and retailers over a bill primarily sponsored by Sen. Dick Durbin, D-Ill., that would require cards from banks with $100 billion or more of assets to offer merchants the choice of two unaffiliated card networks that aren't both Visa and Mastercard.
Doug Kantor, general counsel for the National Association of Convenience Stores and a member of the Merchants Payments Coalition, said that there's "common elements" between the Durbin bill, which he's been involved in discussions with for years, and the pushback against the CFPB proposal.
"Every time you talk about regulation, the banking industry says the sky is falling," he said. "And that is the perfect summation of their reaction to every proposal. 'If you do that it will hurt someone and it'll be consumers.' And with respect to the Credit Card Competition Act specifically, it is plainly untrue."
While the bill's sponsors say it will lower fees and promote competition outside of the "Visa-Mastercard duopoly," advocates for the financial services industry say it's a giveaway to retailers and would increase costs for consumers. Last week, the Congressional Research Service issued a report saying that the impact of card processing changes is unclear.
Some analysts, however, are skeptical that these tactics will make much headway. Ian Katz, a managing director at Capital Alpha Partners, said that lawmakers are already entrenched on their views on the credit card issue, or that they aren't incentivized to take a side.
"That is, I think you have a small group of lawmakers who support it, another group that doesn't like it, and the largest group that just doesn't want to have to deal with it at all because it makes them choose between their local merchants and local bank," Katz said. "The largest group of lawmakers just wants it to go away. I don't think that changes. The chances of this becoming law have always been, and remain, very slim."
The rallying cry around rising costs for consumers has been at least partially successful in another high-profile fight: t
Those ads and other lobbying materials can be a powerful tool, even if the issue is in the regulatory sphere rather than the congressional one. Should enough voters mobilize and contact lawmakers, it gives representatives a reason to put pressure on regulators, which can often be a powerful factor in those regulators deciding priorities for the coming year.
While, unlike Fed Vice Chair for Supervision Michael Barr, the CFPB's Rohit Chopra doesn't have a boss, nor does he answer to a board, that could be sympathetic to Republicans' or moderate Democrats' complaints, Congressional pressure still signals potential avenues for a Congressional Review Act challenge, or areas where a future Republican administration could push back more strongly.
In this letter, Barr specifically ties together the credit card proposal and the Basel III endgame one, saying that they are worth the GAO studying because they "will impact the cost and availability of retail credit."
