NRF is asking the Federal Reserve to avoid writing new rules on credit card late fees in a way that would encourage consumers to put 
retail credit cards at the bottom of their monthly stack of bills.
Under the Credit CARD Act signed into law last year, all credit card fees must be “reasonable,” and the Fed is developing regulations to implement that requirement beginning this August. As part of the Fed’s proposal, late fees would be limited to no more than the minimum monthly payment on the card’s balance.
NRF told the Fed in a letter that the proposed new limit could result in a huge difference in the late fees charged for general purpose credit cards like Visa or MasterCard and fees charged for propriety or private label credit cards issued by retailers.
Bank-issued general purpose cards usually carry higher credit limits than retail cards that can only be used in a retailer’s own stores, and consumers consequently rack up higher balances. With minimum payments based on a percentage of a card’s balance, that means the typical general purpose card might carry a balance of $2,000 and a minimum payment of $45 while a typical retail card might carry a balance of $300 and a minimum payment of $9, NRF said.
If late fees were limited to those minimum payments, a cash-strapped consumer deciding which bills to pay would have a strong incentive to pay the general purpose cards on time and leave the retail cards to pay later, NRF said.
That would put a disproportionate burden of the cost of late payment on retailers, driving up costs for retailers.
To avoid that situation, NRF said the Fed should establish a cap on late fees, but asked that the amount be determined in a way that would “reasonably reflect the broad industry costs” associated with late payments and allow for a late fee larger than the minimum payment but not exceeding the cap to “potentially” be charged. Late fees charged for general purpose cards and retail cards don’t need to be identical but should be comparable, NRF said.
NRF noted that retail credit cards are issued primarily to help sell merchandise rather than to generate revenue from the card itself while general purpose cards are issued by banks specifically to make money off interest and fees. Retailers realize that excessive fees can alienate customers, and impose late fees only to ensure that agreed-to payments are made on time, NRF said. For more information, visit the NRF.
