JPMorgan Chase, one of America’s largest banks, has warned that it may start charging fees for checking accounts and other services if new government regulations capping overdraft and credit card late fees are implemented. Marianne Lake, CEO of consumer and community banking at JPMorgan Chase, said that the bank would need to pass on the increased costs of higher regulation to its 86 million customers. She said the changes would be “broad, sweeping, and significant.”
The Consumer Financial Protection Bureau (CFPB) proposes an $8 cap on late credit card payments and a $3 cap for overdraft fees.
The bureau is also considering limits on debit card fees and the charges banks can impose on companies like Venmo and CashApp for accessing and using customer data. Lake believes that other leading banks in America will likely follow Chase in passing these costs onto customers. She said services like checking accounts, credit score trackers, and planning tools will probably no longer be free.
“It is not practical for many services to be free if we can’t draw from those profit pools,” Lake explained. However, Dennis Kelleher, president of the economics think tank Better Markets, argued that banks are trying to maximize their own profit under the guise of what’s good or bad for customers.
Chase warns of higher consumer costs.
Banks have launched appeals and filed lawsuits, mainly in the Northern District of Texas, to prevent the new regulations from taking effect. The rule to cap credit card late fees is currently pending appeal after a coalition of banks sued to block its implementation. The average late payment fee at American banks is $32 per statement.
Capping this penalty to $8 means that 45 million credit card users could save an average of $220 annually. Dan Goerlich, a partner at PricewaterhouseCoopers, expressed skepticism about banks successfully passing on the fees. He said that most customers can access retail banking easily and seamlessly today, and banks’ hands could be forced by competitors who will offer customers low-cost services.
The CFPB believes the rule will benefit the poorest Americans the most—those who often find themselves unable to pay off their credit card balances and rack up fees as a result. The agency said that over the last decade, banks have hiked late fees under the pretext of inflation to create an “irresistible revenue stream.”
With the CFPB pushing forward with these caps, the landscape of banking in America could shift significantly, impacting both banks and their customers.
