PROTECTING SMALL BUSINESS, PROMOTING ENTREPRENEURSHIP

Kerrigan in DC Journal: Financial Dangers Grow with Government Overreach on ‘Junk Fees’

By at 10 April, 2024, 3:27 pm

In a new DC Journal Op-Ed, SBE Council president & CEO Karen Kerrigan laments intrusive government overreach in President Biden’s war on what he is calling “junk fees.” She writes that consumers and small businesses will not benefit from this unwarranted intervention, and notes that the Consumer Financial Protection Bureau’s (CFPB’s) new rule capping credit-card late fees will actually backfire on consumers who use credit responsibly and make their payments on time. Kerrigan writes:

Capping late fees will not only reduce incentives to borrow responsibly and will punish consumers who make their payments on time. Costs will be shifted, including a reduction in valuable rewards and cashback opportunities, higher interest rates, and ultimately reduced access to credit.

There is scant evidence that consumers are pushing for a government-driven change. According to a recent report, most Americans believe credit card late fees are legitimate and do not constitute “junk fees.” In fact, 76 percent say, “Paying on time is a personal responsibility I accept,” and that late fees are what they “agreed to pay” if they are late. Furthermore, consumers do not think it is fair to be penalized for those who do not pay on time.

Squeezing financial institutions means they will be undermined in providing credit and services to small businesses. Intrusive regulations like this have a track record of producing harmful outcomes. 

Read Kerrigan’s full Op-Ed here.

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