The notion of having the government step in to limit credit card fees for late payments might sound like an innocuous, perhaps even positive idea on the surface. But the reality is that the ramifications for consumers will be anything but harmless. Unintended consequences will follow, no matter what proponents of the regulation claim.
Most credit card consumers have experienced the frustration of dealing with a fee for missing a payment. Having to pay that charge in addition to what you owe can be annoying, especially if you feel that missing the deadline was the result of an honest mistake.
That is the sentiment that the Biden administration and the Consumer Financial Protection Bureau are attempting to exploit with their new rule imposing price caps on what companies can charge when credit card holders miss their payment deadlines.
Dealing with human behavior is complicated, but if there is one immutable dynamic it is that by and large people respond to incentives. The CFPB seems blind to this, and the detrimental effects are real.
Read more in American Banker