Was the CFPB really manipulating data about credit cards?

To the Editor:

In Kathy Kraninger's op-ed "CFPB must stop manipulating data to support its policy preferences," the agency's former director accuses the Consumer Financial Protection Bureau of "misleading use of data." There are several problems with this argument. 

First, Kraninger starts off by citing a CFPB report on credit card interest rates, then pivots to criticizing the CPFB's rule on credit card late fees. She fails to make clear that these are two different subjects. In fact, the February 2024 report could not have been relied upon to set the late fee safe harbor at $8, given that CFPB issued its proposal for this amount in March 2023, nearly a year earlier. Also, the CFPB used the February 2024 report to point out that consumers could save money by using credit cards from smaller financial institutions, which is still sound reasoning. The fact that lower APRs are due in part because credit union interest rates are capped by federal law doesn't take away from the fact that those lower APRs mean more money in consumers' wallets.

Second, Kraninger does mention later in her op-ed the actual data that the CFPB used to justify the late fee rule — the Fed's Y-14 data — but criticizes the CFPB for relying on it instead of cost data from the credit card issuers themselves. The flaw in this argument is that the CFPB did ask card issuers to supply their own data about their costs — and the issuers failed to do so. As the CFPB noted in the proposal's Supplementary Information (page 18,909): "Card issuers and trade group commenters, however, did not provide detailed information on the type of costs, and the dollar amount of the costs, they incur to collect late payments." In other words, the CFPB showed its math (i.e., the Y-14 data), the issuers did not. And to imply that the Federal Reserve is not a reliable source of data is surprising.

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Indeed, even with the CFPB's safe harbor of $8, card issuers are permitted to charge more if they can show that collecting late payments costs them more than $8 — again, if they show their math. The fact that they refuse to do so can only suggest that their math does not justify late fees over $8.

Finally, it's ironic that Kraninger attacks the CFPB for manipulating data when, in April 2020, Trump appointees at the bureau under her leadership were themselves accused of manipulating data in order to water down a rule to regulate payday loans. This looks like another attempt to use fuzzy math to help lenders support their policy preferences at the expense of people who most need their help.