continues. host: a discussion on credit card late fees with elyse hicks as the consumer policy counsel. thanks for joining us this morning. guest: thank you for having me. host: tell us about your organization and what it does in the space of credit cards, and how are you funded? guest: americans for financial reform is a nonpartisan nonprofit made up of 200 organizations and we were formed in the wake of the 2008 crisis. we are working to lay a foundation for a stable and fair, equitable economy for all people. we are funded by grants and donors who feel we are doing great in this work. host: before we go to specifically what the president said about credit cards, talk a

little bit about exactly what your organization sees, how your organization views them and what issues you have with them. guest: so the overall thing that we feel about credit card late fees is we agree with the proposed rule to make credit card late fees more proportional to what credit card issuers are actually putting out or spending to collect on these late fees. we think that the president's speech was in line with how we feel about credit card late fees. host: let's hear from the president from earlier this week at the state of the union talking about those credit card fees. [video clip] president biden: credit card companies charge an average of $31 whenever you cannot pay your bill on time. that's on top of the interest you are already paying. now, nobody is saying that you shouldn't pay your fees on time

and no one says a bank should lend you money for free. but that's what banks charge interest for. but the obama-biden administration passed the bipartisan law that said banks cannot charge late fees that are significantly more than the late payments cost them in the first place. it doesn't cost 31 bucks for a bank to process the late fee but that's how much they are charging you now. folks, that's a junk fee. if there ever was one. and it can drain hundreds of dollars a year from the pockets of hard-working american families, especially folks who are already struggling to make ends meet. host: the president, from earlier this week. you talked about the consumer financial protection bureau, their goal or what they want to do for these fees.

tell us more specifically what they are looking to do. guest: i'm going to take it back to the card act of 2009. the card act -- and the president did mention it -- was established to protect consumers from predatory credit card fees. that is interest rates without disclosure or notice, excessive late fees, and arbitrary and fluctuating due dates. so when the credit card act of 2009 was passed, congress bipartisanly past that deal. the federal reserve board went back into thousand 10 and created this immunity provision for card issuers and banks, saying you can raise your late fees year after year under the guise of inflation. so now we have $30 late fees for the first offense and $41 late fees for a subsequent offense, which is costing americans $12

billion a year. the cfpb has proposed the rule to go back to the card act to make sure that late fees are reasonable and proportional to what it is costing card issuers to cover these late fees. that's about an eight dollar fee. which is going to save americans $9 billion a year, about a 75% savings on credit card late fees. host: if it goes from $30 to $41, to eight dollars as a cap, do you think that would encourage people to skip out on paying knowing if you are going down for $41, it is only going to be eight dollars if you miss a payment? guest: the rhetoric is that late fees, the thing about late fees, they are trying to encourage people to pay on time. but if you are in a low income situation or a subprime borrower, and the banks know

this when they choose to issue you credit, tacking on a late fee is insult to injury. if you are unable to pay, the credit that you are using plus the interest which is about 120 billion dollars a year that americans are paying on interest for credit cards, plus a late fee, they are setting themselves up. host: amecan bankers association weighed in on proposal and this is part of the proposal will harm consumers by reducing competition and increasing cost of payment. it will res low credit scores and is in ct with the act. it cd issuers will be forced to reduce credit lines, tightening standards, and raising apr's for all americans including the millions who pay on time. how would you respond? guest: we've heard this before. we've heard when congress passed

the card act. the banking industry will say we have to raise interest rates, be more stringent and particular about who has access. why would the cfpb want to hurt the people they claim to help by denying them access to credit? a study done for years after the card act suggests that the industry and banks and card issuers did not raise interest rates. they did not become more stringent with giving access to credit, hence them preying on subprime consumers. that study showed the card act saved consumers $11.9 billion a year. the cfpb's proposal has the same effect. it could save consumers $9 billion a year. the only thing the industry is worried about is not having that extra cushion at the end of the year for the bottom line. host: our guest is with us until

10:00, and if you want to ask about the proposal and what president biden said, eastern and central time zones, (202) 748-8000. . mountain and pacific time zones, (202) 748-8001. text us at (202) 748-8003. how are late fees typically calculated? how does that calculation come about? guest: right now, credit card late fees are adjusted for inflation as well as a credit card late fee can be 100% of what the minimum payment is. a lot of these numbers are kind of arbitrary and the provision has given industry a lot of leeway. they don't even have to prove that this inflation adjustment is coinciding with the cost that it costs them to do business

regarding late fees. host: the cfpb, according to its reporting, they charged $12 billion in late fee penalties. this bond to that. -- respond to that. guest: it was $14 billion. it went down because of the stimulus packages the president at the time issued. consumers were actually paying down their credit card debt. it was down from $14 billion. host: the americans for financial reform's elyse hicks joining us. our firth call -- first call comes from ruth in california, go ahead. caller: good morning. guest: good morning. caller: i'm glad you brought up the subject of bankers and the banking industry with relation to credit cards. my credit card is issued by my bank. my bank is also associated with

experience, which is one of those credit agencies. so this wrote -- this is related to the whole thing of harming your credit and all that. they are constantly sending me emails that say, you could pay down your balance better with one of these credit cards with a balance transfer, yada, yada. so i look at them and they do have a pretty good idea of the information that's in my bank account because they are associated with my bank. so if i apply for these cards and am turned down, i'm not so

upset about being turned down as the prospect which was given to a really good chance of getting, quote unquote, this choice chosen especially for you. but when we apply for a credit card, even if we don't get it, they have to do this -- do what is called a hard credit check if that is the correct term. host: thank you, go ahead. guest: what ruth is speaking on, and it is in large part prior, with experience being hooked up with banks and they are sharing information. that's a totally different issue entirely. but yes, when you do apply for a credit card there is a hard

inquiry on your account. ruth is really talking about data privacy which we can get into another call another day. host: a viewer off of twitter asks -- how much does the average american pay in late fees compared to finance charges? guest: americans as a whole are spending $12 billion a year on credit card late fees and about 42 million americans last year admitted to actually missing a payment. that could be because of anything. auto pay wasn't set up, you simply forgot. it's not because people don't want to say and also because the cfpb wants to eliminate late fees altogether. it is a myriad of things. people are paying a lot, $12 billion in late fees. host: dan in pennsylvania, go ahead. caller: way -- why do banks give

people money back and take money from people? they take money from people who pay late fees, $30, and they give people back 1%, 2% on credit card if you pay it off on time. why would banks not extend the credit that people need instead of taking from one person and giving to another? guest: that's a great question. normally, people with we call them super prime consumers who have over 700 credit scores are actually the ones getting those incentives because they are in a better place. when we are saying "incentives," we are talking about money back when you make purchases because they pay those off. they are not in the cycle of carrying a balance. it seems like lower income

subprime and bipoc communities are caught in the cycle of not being able to pay off their credit cards and being subject to late fees. a lot of these smaller banks and credit unions who are in the card issuing game kind of prey and want to do business with subprime consumers because they know from the outset they will not be able to pay the credit interest and then tack on a late fee. they use that revenue, which is a substantial part of their bottom line, about 15%, to move the bank or the credit union along, or to make money in that way. so it's not set up for those who cannot pay. that's where the bulk of the money is being made. host: this is mark off of twitter saying and making the statement -- if credit card late

fees are eliminated they will charge the rest of us fees to make up for the lost fees. this will backfire and the credit card companies will no longer approve high risk applicants. guest: going back to the card act, there was all of this rhetoric before. it ended up saving consumers $11 billion. this is just rhetoric industry is pushing. they will probably not, most likely not raise interest rates. they didn't do it with the card act. they probably aren't going to do it now. they probably will not be more stringent on who gets access to credit because they depend on subprime -- subprime borrowers and consumers to -- the profit center. there are over the limit fees, convenience fees. we are just talking about late fees. there's a myriad of other fees

we are not talking about. host: is it possible to negotiate with a company over late fees? guest: it is possible and i've done it. it happens. i've done it and paid the bill the next day because i just forgot, and they waive the late fee. i'm not saying card issuers and banks are totally against haggling or negotiating with the credit card late fees, but we are talking about a cycle of poverty when people are just not able to pay. this is month after month after month and they dig themselves in a bigger whole. host: here is kevin in texas. caller: good morning. guest: good morning. caller: credit -- and i'm just an old country boy with common sense -- but would you define credit as this? it is a two equation problem. the ability to earn and the

ability to pay it back. is that a correct statement? guest: i can agree with that. caller: then what you are talking about is charity. and charity starts at home, correct? guest: no, that's not what i mean. caller: well, i would say we learned from the students who didn't pay their loans, the government loaned the money, they had no ability to learn -- earn. now they have no willingness to pay it back. really it is just charity with my tax dollars. host: thanks. anything to that? guest: no. host: simone in north carolina. could you tell me a little bit about -- as far as the cfpb's proposal, what status, has it

been put into place or what's the timeline as far as where it's at? guest: this is a notice of proposed rulemaking so the cfpb just stated that they are looking into this issue and they have framed a rule that the eight dollars is reasonable and proportional to what banks are paying, and they still have to go through the process. they have to listen to how this will affect industry. i have to go through a comment period. we don't expect a final rule until maybe next year. host: once they go through the comment period they could enact the rule with no steps after that, right? they could put it into place? guest: i'm not at liberty to speak on what the cfpb can and cannot do. i don't work there. they normally go through a period where they listen to industry as well as consumer

advocates like me. and they are pretty fair in listening to both sides. i think they will put a lot of time and effort into getting this right. host: if the rule does go forward, is it open to legal challenges? guest: it will be. host: simone in north carolina, go ahead. simone in roanoke rapids, hello. we will go to jerry in texas, good morning. caller: ok, just changing the name makes a big difference. organized crime is now big business. credit card interest used to be called loansharking. host: jerry, go ahead. let's try simone again from north carolina, hello. all right.

this is gary in kentucky, hello. caller: hello. credit is based on your ability to pay it back and when you sign in for credit card, you get a service agreement. you know the deal going in. you know the high charges that could be entailed on your bill, so on the part of the consumer, somebody standing in for these people, it is part of their responsibility. if you make a late payment on your house, they foreclose on you. this is just part of consumer, i don't know, overreach. host: that's gary in kentucky. guest: thank you for your comment. what we have seen is credit card companies are charging us five times more than it actually costs them to collect on these late payments.

again, we are not saying late payments should be totally eliminated. we are saying that credit card issuers and banks shouldn't make money off the backs of people. we are talking about 10% of their total assets going to junk fees and credit card late fees are junk fees. they should be making money off the backs of that. if it costs something, they should pass on the cost to consumers, yes. i'm saying that's not $30 or $41. that's five times more than what it's costing them to collect. host: eastern and central time zones, (202) 748-8000 and the mountain and pacific time zones, (202) 748-8001. robert from texas texted -- i support capping credit card late fees out of personal experience. i use to have the worst time paying off my credit cards because of those fees on the interest.

also, cap the interest at a maximum dollar value. guest: they don't have the power to set a user recap for anything -- usury cap for anything. adding insult to injury, especially if it is not causing the bank -- costing the bank to pay that much to collect. host: from pennsylvania, rick. caller: all of the comments have been extremely interesting. i just want to say one thing. these students take a loan because they have no ability to pay for college. they go to college, become professionals, and contribute to our economy in many different ways. however, the banks set up these predatory systems of payback. i don't see the difference to

giving some or all of the student loans in accordance with the same systems used to give some or all the debt of companies, medical pharmaceuticals, and banks and their buyouts. it needs to be a balance. inc. you for your time. -- thank you for your time. host: ms. hicks, anything to that? guest: i guess just going back to the other comment trying to -- credit card fees to student debt, the same debt -- they are two different avenues and aspects. there are predatory practices in student lending land and i also

-- there are also credit -- predatory practices in credit card fees. to mesh those two together, predatory practices is any financial set up that puts consumers last and industry first is just wrong. host: there was a comment about the cfpb's proposal cing from asciation, their president saying their assoc strongly opposes the proposal as any duction in late fees safe harbor will have a significant negatiact small community-based credit unions. itlearly warrants the review of a small panel and it is irresponsible to bypass the statutory regulations which was designed to calculate the impact on small entities. our credit unions going to be affected disproportionately or

do they take a different approach when it comes to late fees? guest: it depends to -- on credit card late fees more than the big banks do and that's just a numbers game. they also are extending credit to subprime borrowers a lot more than bigger banks. that's also a numbers game. credit unions may have something to learn about they may get priced out of the card issuer game, but i will say this. this is your business practice to make money on the backs of low income people, and you are intentionally preying on people you know cannot pay the credit you are issuing them plus the interest plus a late fee. maybe you shouldn't be doing business in that area. host: simone in north carolina, go ahead. caller: i'm a senior, 69, have

been through the flu, raging diabetes, so it has been hard for me to pay my creditors. goldman sachs, one of the biggest banks around, sent an armed police sheriff to my house which is so embarrassing. is that a normal way to collect money, to pay the creditors, show up? guest: no, that is not a normal way to collect on any credit. you probably should make a complaint with the cfpb and the -- on that. host: karina. caller: a gentleman called in and said people know what they are getting into when they get these cards. that's not true. if you are late on one card, they change all your agreements on other cards. they jack up the interest rate to 29%, which used to be illegal back in the 1980's.

i hope she gets her low late fees through. host: is what she said about how it extend to other cards you may hold, are they potentially impacted? guest: the credit card act, that used be something and that's why the credit card act came into play to forbid that. that should not be happening and if it is happening, it is running afoul of the law. host: sheila in connecticut, hello. you are next up. guest: good morning.

taking these for lack of knowledge or for money because there are so many. it seems almost they -- they are taking our money intentionally because it's a business -- it's their business to do so.

are they trying to put into place the stock buyback? . >> there is a report out that looks at the top banks. what they found is that those banks set up shop in communities and counties that are living below the national poverty level and communities -- households are not making the median national income. yes, banks are definitely preying on low income consumers and offering them credit they cannot afford. host: the organization is the americans for financial reform and our financial security.org

is where you can check out their work.