Regulatory Notes: CFPB’s Late Fee Rule & Your Marketing Materials

This week, the CFPB finalized a rule that bans excessive late fees for credit cards.

Below is a brief summary of the rule, who it impacts, and what it means for your marketing materials.

What happened?

The CFPB rule revises Regulation Z, which implements the Truth in Lending Act (TILA), to limit credit card late fees to a maximum of $8 for issuers with more than one million accounts—a significant reduction from the previous amounts, which could be as high as $41.

This regulation also eliminates automatic annual inflation adjustments to these fees, aiming to ensure that late fees are reasonable and proportional to the cost incurred by issuers due to late payments.

Who does this impact?

Impacted: Large credit card issuers with over one million accounts are directly impacted by this rule. 

Not Impacted: Smaller issuers, those with fewer than one million accounts, are not subject to this specific cap. 

What does this mean for marketing compliance?

Maintaining marketing compliance with the CFPB’s late fee rule requires credit card companies to ensure that their marketing materials and communications accurately reflect the terms and conditions of their credit card offerings, including any fees related to late payments.

Here are some steps credit card companies can take to ensure compliance:

• Seek legal guidance: Consult with your legal team to ensure that practices and materials are in compliance with the new rule.
• Update all marketing materials: Review and update all consumer-facing marketing materials (printed and digital), including website content, advertisements, emails, social posts etc., to reflect the new rule. Ensure that any references to late fees accurately reflect the maximum allowable fee under the rule.
• Update disclosures: Clearly disclose the late fee amount and any other relevant terms and conditions associated with late payments in all marketing materials. Disclosures should be prominent, easy to understand, and presented in a manner that ensures consumers are aware of their obligations.
• Educate marketing staff: Train your marketing team on the new rule and other regulatory requirements related to credit card marketing. Ensure that they understand their role and responsibilities for ensuring compliance with the new rule.
• Regularly monitor marketing materials: Implement processes to monitor marketing practices and materials regularly to ensure ongoing compliance with the new CFPB rule. Consider using technology to make this process automated and efficient.
• Use technology for discovery: Automate the discovery process across marketing channels to identify all instances where late fees are mentioned and ensure they comply with the new rule.