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A12 BUSINESS
Thursday 29 June 2023

Do credit card late fees actually

protect consumers?

By JAIME HANSON of Nerd-
Wallet
In a time when inflation
is driving up the cost of
nearly everything you
buy, something else has
increased, too: credit
card late fees. Thanks to
a clause in the 2009 Credit
Card Act, credit card issu-
ers can raise late fees, and
over time those fees have
risen to current maximums
of up to $41.
The Consumer Financial
Protection Bureau recently
proposed a rule that would
slash credit card late fee
maximums by 75%, to $8 Consumer credit cards are posed in North Andover, Mass.,
March 5, 2012.
per late payment. While Associated Press
lower fees may seem like
a good thing for the con- late fees in particular ac- Steep late fees aren’t the
sumer, some argue that count for about 15% of to- only way to help lessen the
paying less could do more tal credit card profitability. damage of late payments.
harm than good. Accord- And according to the CF- The CFPB argues that new
ing to the American Bank- PB’s 2021 Consumer Credit digital notification deter-
ers Association, such a re- Card Market Report, that rents can motivate late-
duction “will result in more cost is borne most by the paying customers in lieu of
late payments, higher debt customers who can least high fees, making the cur-
and lower credit scores.” afford it. The report shows rent policy obsolete.
Habitual late payments that of the over $14 billion According to Wei Zhang,
can indeed damage your in late fees paid by con- deputy assistant director of
credit score, which im- sumers in 2019, subprime the CFPB’s Office of Con-
pacts access to credit and and deep subprime con- sumer Credit, Payments,
how much you’ll pay in sumers paid 42% of that and Deposits Markets,
interest. And as payment total while representing just “These days the vast ma-
due dates pile up, late 12% of total accounts. jority of credit card borrow-
payments can lead to an While lobbying organiza- ers are enrolled in online
escalation of debt. That es- tions like the ABA may banking, and nearly two-
calation is especially con- have a valid point about thirds use a mobile app for
cerning when, according the long-term dangers of their card.”
to a first-quarter 2023 study lower late fees for con- (9) Consumers also have
by TransUnion, credit card sumers, it’s important to re- ready access to their credit
debt is at near-record lev- member their bias. As Scott scores, so they witness the
els, rising nearly 20% year Gilpatric, a behavioral impact of late payments in
over year. economist at the University nearly real time. q
LATE FEES: DETERRENT OR of Tennessee who special-
PROFIT SOURCE? izes in procrastination and
The CFPB argues that credit self-control, puts it, “credit
card companies are using card companies aren’t try- For Rent
late fees to pad their bot- ing to set up a mechanism Marriott Surf Club
tom lines, not to help peo- in the consumer’s interest. 1 Br sleep 4 $1500
ple manage their financial They’re trying to maximize studio sleep 4 $ 1250
health. A 2022 Federal their own profits.” 2 Br sleep 8 $ 2000
Reserve report shows that CONSUMERS CAN EMPLOY Call : 011-297-630-1307
credit card fees including ALTERNATIVE GUARDRAILS johnnypaesch@gmail.com
www.halleytimetravelaruba.online