We wish to thank Ken Musante for sending in the following in response to news that the cost of a late credit card payment could soon be going down: "Seems like good news right?" he wrote. "The reason, however, is misguided and suboptimal (a word I use when I think 'freakin' crazy may offend some people.) Federal regulators issued a new rule March 5, 2024, capping credit card late fees at $8, down from the current average of $32.
"Why $8? Well, this is thought to be the cost of collecting on an overdue payment. I did not realize that we have moved so far that we must only price items at what their actual cost is. I will be sure to share this with my bartender the next time I receive a bill for a $20 drink! "Because the rule only applies to large issuers, with more than 1 million cards outstanding, no one will complain much. Nobody likes banks. The Great Recession exposed what evil-doers they are. And 2023 exposed how fast some of the most revered banks could dissolve in a puddle. "I didn't believe it could happen. I speculated and lost $15,000 in First Republic stock. I still own the shares. They are worth $28.59. I'm unsure why they are still trading and who would even buy them but I'm holding to the end.
"Rent control decreases the supply of housing. All else being equal, price controls on credit will limit the supply of credit. 'All else' is never equal, however. Card issuing banks are not about to earn less on their portfolios. Some will increase interest rates and others will decrease rewards. "Mind you, they won't apply these changes over the entire portfolio. Instead, they will apply it to the swath of the portfolio where the late fees are being driven: the folks at the lower end of the socio-economic spectrum to make up for having to provide specific services 'at cost.' Consequently, if you were less well off, but paid your bills on time, you would likely now have to compensate fellow cardholders who failed to do so.
It would be ironic if issuers pushed to increase interchange to make up for the decrease in late fees. Legislatures are loath to insert price controls on duopolistic and monolithic organizations that control interchange but feel comfortable doing so on late fees. If it weren't for the $15,000 I lost, I'd feel bad for the banks. The U.S. Chamber of Commerce said the CFPB had gone too far with the new cap on late fees, which is supposed to take effect 60 days after March 5. 'The agency's final credit card late fee rule punishes Americans who pay their credit card bills on time by forcing them to pay for those who don't,' said Neil Bradley, executive vice president of the chamber. Have we gone too far or am I old and cranky?
Do you feel there's a place for regulation in the electronic payments industry? If so, what makes sense to you, and why? Email us at greensheet@greensheet.com to share your opinions. 
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