When consumers make a misstep in dealing with their credit card debt, they generally face penalty fees from their lender as a consequence, but the amount being collected by lenders as a result of these problems has been declining for a few years now.
The amount of money collected as a result of late, over-limit and insufficient funds fees slipped to $17.8 billion last year across the entire credit card industry, according to new data from the latest R.K. Hammer Card Penalty Fee Index. That was down from $19.4 billion in 2011, and a significant decline from the $23.9 billion observed in 2009. The total does not include money collected as a result of penalty interest rates applied to accounts following these missteps.
Much of this is likely due to changes put into place by the Credit Card Accountability, Responsibility and Disclosure Act, which took full effect in 2009, the report said. This limited many of the ways in which lenders could charge borrowers for making critical mistakes in dealing with their accounts. However, it may also be possible that continued drops in rates of delinquency and default show consumers are getting better at dealing with the accounts in general and are also making fewer mistakes, which, when combined with heavier federal regulation, produced the larger declines in penalty fees seen last year.
However, while changing consumer habits will likely continue to play a role in the amount of money lenders collect from these late fees, the company sees further federal rules as being unlikely, the report said.
“What is still on the horizon for those in the card space and much less certain is to what extent the CFPB will exercise its new regulatory and oversight powers and suggest even more changes to the industry,” said company founder and chief executive officer Bob Hammer. “It is R.K. Hammer’s take that the odds are vanishingly small that no more changes will occur.”
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Consumers have significantly reduced instances of late payments and other missteps in the years since the recession ended. However, while these problems continue to decline, and now stand at all-time historic lows, experts say that delinquency rates must logically reach the point at which they bottom out and begin to grow again as lenders once again slacken credit restrictions. As such, the amount collected as a result of penalty fees could rise again in the future.