Consumer agency softens fee limit
WASHINGTON – The Obama administration’s consumer financial watchdog agency is backing off a plan to limit big upfront fees on credit cards.
The Consumer Financial Protection Bureau acknowledged Thursday that its proposal would increase costs for cardholders and allow banks to charge more in fees.
The limit applies to the fees that banks can charge people in the first year they hold a credit card. Those can include annual fees, application fees and other upfront charges.
An earlier plan would have blocked banks from charging fees totaling more than 25 percent of the cardholder’s credit limit. It would have limited application fees and other upfront costs.
The agency is supporting a change that would let banks charge whatever fees they want before the card is issued. The 25 percent limit would only apply to fees charged after the card is issued.
The CFPB was set up after the financial crisis to protect consumers from loans and cards with hidden fees or other traps. The CFPB is accepting public comment until June.
If the proposal is approved, banks could charge steep fees to apply for or activate a card. After the card is issued, the banks could continue tacking on fees in the first year until they reach 25 percent of the credit limit.