A possible reduction to credit-card late fees is the most underappreciated policy risk to the financial services industry, according to a new analyst report.
Raymond James analysts led by Ed Mills warn the Consumer Financial Protection Bureau could take action to limit such fees. In June, the agency said it would likely seek to lower or abolish late fee safe harbor rules.
“There is a very high probability that we will see a material reduction in late fees, up to and including the elimination of the safe harbor. Such changes could challenge the ability of credit card issuers to charge late fees overall,” say the analysts.
According to the CFPB, 18 of the top 20 issuers charged fees at or near the maximum of $30 for the first time, and $41 for subsequent. The overall average first-time late fee was $26.
There isn’t a readily available breakdown of credit-card late fees by issuer. Capital One
COF,
has by far the most credit card exposure as a percentage of total loans, followed by Citi
C,
and JPMorgan Chase
JPM,
Puerto Rico-based OFG Bancorp
OFG,
has the highest past-due ratio as well as net charge-off ratio.
Capital One, JPMorgan and Citi shares have dropped between 20% and 30% this year. OFG shares have climbed 4%.
