The Consumer Financial Protection Bureau, created by the Obama Administration as a part of Wall Street and credit card reform, is announcing that it will be backing down from its previous plan to limit the amount in upfront fees that a credit card company can charge you for using one of its cards.
The agency acknowledged in a statement that its plans to abandon the limitation of upfront fees will lead to higher charges for consumers but due to lobbying pressure from the industry and a recent court ruling against the action, the CFPB has no other viable path forward on this particular piece of regulation.
Under new regulation enacted by the agency, banks and credit card issuers are not permitted to charge in fees to the individual more than 25 percent of the total available credit during the first twelve months of ownership. This regulation, however, does not cover the amount of upfront or activation fees that can be billed to the consumer.
In legislation proposed last year, the upfront fees would have been included in the total amount (the 25% number), but that is no longer a possibility due to court intervention. Now, the law will simply state that card companies can charge whatever they wish upfront and the 25% rule only applies after activation.
The CFPB was setup after the financial crisis of 2008 to protect individuals from predatory terms and conditions that were up until that point running rampant throughout the U.S. credit industry. The Republican Party and business lobbyists fought tirelessly to prevent appointments from being made to the bureau, thereby rendering it moot for nearly two years after the bureau was created. President Barack Obama was able to push through a recess appointment after the Senate adjourned for holidays in 2011.