WASHINGTON, D.C. – The Consumer Financial Protection Bureau (CFPB) finalized a rule today to cut excessive credit card late fees by closing a loophole exploited by large card issuers. The rule will curb fees that cost American families more than $14 billion a year. The CFPB estimates that American families will save more than $10 billion in late fees annually once the final rule goes into effect by reducing the typical fee from $32 to $8. This will be an average savings of $220 per year for the more than 45 million people who are charged late fees.

“For over a decade, credit card giants have been exploiting a loophole to harvest billions of dollars in junk fees from American consumers,” said CFPB Director Rohit Chopra. “Today's rule ends the era of big credit card companies hiding behind the excuse of inflation when they hike fees on borrowers and boost their own bottom lines.

Concerned that credit card companies were building a business model on penalties, fee harvesting, and bait-and-switch tactics, Congress passed the Credit Card Accountability Responsibility and Disclosure Act of 2009 (CARD Act). The law banned credit card companies from charging excessive penalty fees and established clearer disclosures and consumer protections.

In 2010, the Federal Reserve Board of Governors voted to issue a regulation implementing the CARD Act, which made clear that banks could only charge fees that recover the bank’s costs associated with late payment. However, the rule included an immunity provision that allowed credit card companies to sidestep accountability if they charged no more than $25 for the first late payment, and $35 for subsequent late payments, with both amounts to be adjusted for inflation each year. Those amounts have ballooned to $30 and $41, even as credit card companies have moved to cheaper, digital business processes. Congress transferred authority for administering CARD Act rules from the Fed to the CFPB.

After a thorough review of market data related to the 2010 immunity provision, the CFPB’s final rule adopts a lower threshold of $8 and ends automatic inflation adjustments for that amount for issuers that have 1 million or more open accounts.

The CFPB has found that since 2010, issuers have generally been charging consumers more in credit card late fees each year—growing to over $14 billion in 2022, and representing more than 10 percent of the $130 billion issuers charged consumers in interest and fees. Late fees are layered on top of many other punitive measures credit card companies impose on consumers who miss payments, including extra interest charges, loss of their grace period, negative credit reporting, reductions in their credit limit, and a higher interest rate on future purchases. The average late fee for major issuers has steadily ticked up since the passage of the CARD Act, going from $23 at the end of 2010 to $32 in 2022. For some large credit card companies, late fees are a major driver of their profit model.

The CFPB’s final rule applies to the largest credit card issuers, those with more than 1 million open accounts. These companies account for more than 95% of total outstanding credit card balances. CFPB data shows that smaller issuers tend to charge lower rates and fees to their borrowers, while the vast majority of the largest issuers charge close to the maximum allowable late fee amount. Today’s final rule:

• Lowers the immunity provision dollar amount for late fees to $8: Based on data analyzed by the CFPB, a late fee of $8 would be sufficient for larger card issuers, on average, to cover collection costs incurred as a result of late payments.

• Ends abuse of the automatic annual inflation adjustment: The CFPB found that many issuers hiked their late fees in lockstep each year without evidence of increased costs. The CFPB’s final rule eliminates the automatic annual inflation adjustment for the $8 late fee threshold. This adjustment was added by the Federal Reserve Board and is not required by law. The CFPB will instead monitor market conditions and adjust the $8 late fee immunity threshold as necessary.

• Requires credit card issuers to show their math: Larger card issuers will be able to charge fees above the threshold so long as they can prove the higher fee is necessary to cover their actual collection costs.

The rule does not change the credit card issuer’s ability to raise interest rates, reduce credit lines, and take other actions to deter consumers from paying late. In fact, the rule would increase the desire for credit card companies to facilitate on-time payment, since it would lower incentives to build a business model on late fees.

Today’s final rule is part of a continued effort by the CFPB to address problems and foster competition in the $1 trillion credit card market. The CFPB is working to help consumers find lower interest rates, as consumers paid a record-high $130 billion in credit card interest and fees in 2022, and the average cardholder carries a balance of over $5,000.

A recent CFPB report found that increases in APR margin charged by the largest issuers generated around $25 billion in additional interest revenue in 2023. Data submitted to the CFPB by credit card companies shows that small banks and credit unions offer significantly lower rates, about 8-10 percentage points lower than the largest 25 credit card companies. Last week, the CFPB issued guidance to rein in rigged comparison-shopping results for credit cards and other products, and is developing a consumer-facing tool that, once finished, will give people looking for a new credit card an unbiased way to compare credit card terms and interest rates.

The CFPB has also taken enforcement action against illegal conduct by credit card companies. Recent actions include ordering Bank of America to pay a $30 million fine and repay tens of millions of dollars to consumers for illegal conduct including withholding credit card reward bonuses the company explicitly promised and opening unauthorized accounts. The CFPB also ordered Citizens Bank to pay a $9 million fine for failing to give refunds to consumers who reported fraud or billing errors, and ordered Citibank to pay $25.9 million for intentional, illegal discrimination against credit card applicants the bank identified as Armenian American.

Read the text of today’s final rule.

The effective date of the final rule will be 60 days after publication of the rule in the Federal Register.

Consumers can submit complaints about financial products or services by visiting the CFPB’s website or by calling (855) 411-CFPB (2372).

Employees of companies who they believe their company has violated federal consumer financial laws are encouraged to send information about what they know to whistleblower@cfpb.gov.

                                                                                    ###

The Consumer Financial Protection Bureau is a 21st century agency that implements and enforces Federal consumer financial law and ensures that markets for consumer financial products are fair, transparent, and competitive. For more information, visit www.consumerfinance.gov.

https://www.consumerfinance.gov/about-us/newsroom/cfpb-bans-excessive-credit-card-late-fees-lowers-typical-fee-from-32-to-8/

Chicago – L.L.Bean, Citi Retail Services and Mastercard are excited to announce a new co-brand credit card for L.L.Bean customers with an enhanced rewards structure and suite of benefits, available today.

L.L.Bean Mastercard cardmembers now have the opportunity to earn more rewards on everyday purchases, including:

• 4% on L.L.Bean purchases
• 2% at gas stations
• 2% at restaurants
• 1% on all other purchases

Rewards are earned as "Bean Buck" points and can be used for savings on L.L.Bean purchases online, in-store or by phone. "Bean Bucks" can be used in any amount and never expire as long as cardmembers continue using their L.L.Bean Mastercard. In addition, cardmembers continue to enjoy exclusive L.L.Bean benefits, including free shipping, free return shipping and free monogramming.

The card has no annual fee and there are no limits on rewards. Customers can apply for the new L.L.Bean Mastercard online, in-store or by calling L.L.Bean.

As part of this new partnership, Citi Retail Services, one of North America's largest and most experienced retail credit solution providers, has acquired the existing $1.5 billion L.L.Bean co-brand credit card portfolio. Existing cardmembers will be issued new L.L.Bean Mastercard accounts and will be automatically upgraded to the new card's enhanced value proposition.

"We are thrilled to be welcoming Citi and Mastercard to our family of business partners," said Steve Smith, President and CEO of L.L.Bean. "Their extensive retail experience and ability to put together a program to enhance our customers' shopping experience made them a natural choice. Our new co-branded card and the greatly enriched rewards it offers are fantastic for our current customers and will also help us welcome new customers to L.L.Bean to share in our passion for the outdoors."

"We are excited to work with L.L.Bean to drive enhanced value for customers of this beloved American brand through the L.L.Bean Mastercard," said Craig Vallorano, Head of Citi Retail Services. "This new agreement with L.L.Bean is a tremendous addition to Citi Retail Services' family of industry-leading brands, and we look forward to bringing innovative offerings to their customers throughout the years ahead."

"L.L.Bean is much more than a retailer, it's a lifestyle brand that has redefined customer loyalty and we're thrilled to partner with them to deliver a card program that extends this lifestyle," said Craig Vosburg, president, North America, Mastercard. "In partnership with Citi, we'll bring the benefits and experiences that allow L.L.Bean enthusiasts to explore their passion for the outdoors with the advanced technologies that let them pay when, how and wherever their adventures take them through worldwide acceptance."

Citi
Citi, the leading global bank, has approximately 200 million customer accounts and does business in more than 160 countries and jurisdictions. Citi provides consumers, corporations, governments and institutions with a broad range of financial products and services, including consumer banking and credit, corporate and investment banking, securities brokerage, transaction services, and wealth management.

  By  Jennifer Surane   

https://www.bloomberg.com/news/articles/2018-01-18/amex-co-brand-card-wins-take-a-toll-as-rewards-costs-keep-rising

January 18, 2018, 2:37 PM MST Updated on January 18, 2018, 4:24 PM MST

· Card issuer suspends buyback program as it rebuilds capital

· Shares fall as forecast for profit in 2018 misses expectations

A string of co-brand credit-card wins is getting expensive for American Express Co.  The cost of paying out rewards to card members climbed 12 percent to $1.98 billion in the fourth quarter, the most in at least seven years, according to data compiled by Bloomberg. During 2017, AmEx won dual-issuing rights with JPMorgan Chase & Co. for Marriott International Inc.’s suite of cards and exclusive rights to issue credit cards for Hilton Worldwide Holdings Inc., ending an agreement in which it shared the business with Citigroup Inc.

AmEx has been spending more to ink co-brand deals after parting ways with Costco Wholesale Corp. and JetBlue Airways Corp. sparked the card issuer’s worst stock slump since the financial crisis. About $42 billion of co-brand deals are open for bid in 2018 and 2019, meaning there are many opportunities for AmEx to gain share in the market, according to analysts at Susquehanna Financial Group.

AmEx has boosted spending on rewards as it tries to win more co-brand deals

Source: Company filings

Renewing the Marriott and Hilton deals will crimp earnings by more than $200 million this year, Chief Financial Officer Jeff Campbell said during a conference call with analysts on Thursday. He cited an increase in customer spending -- especially on the firm’s recently retooled Platinum product -- as one reason for the higher rewards costs in the quarter.

“As you would expect in today’s competitive co-brand environment, the margins are lower on these partnerships starting in January,” Campbell said. “We still have very attractive economics for us. They’re just not as attractive as they generally are.”

AmEx stock dropped 2.7 percent to $97.14 in late trading after it said it expects earnings per share of $6.90 to $7.30 in 2018, below the $7.32 average estimate of 14 analysts surveyed by Bloomberg. The company said it expects its effective tax rate for the year to be 22 percent.

Results were hurt by a $2.6 billion charge related to the Republican tax bill, the company said. The charge crimped regulatory capital, and AmEx announced it will suspend share buybacks in the first half as it rebuilds that capital.

“Overall, we believe the Tax Act will be a positive development for both the U.S. economy and American Express,” AmEx Chief Executive Officer Kenneth Chenault said in the statement. “Given the momentum in the business and the anticipated benefit of a lower tax rate, we now expect to invest up to $200 million more in 2018 than we originally planned for customer‐facing growth initiatives.”

Other card issuers have signaled that they’re pulling back on rewards. 

Citigroup, which won Costco’s business from AmEx in 2015, said on Tuesday it will scale back promotional offers and attempt to encourage customers to keep a balance on cards so the lender can earn more from interest and fees. JPMorgan said last week that it had finished renewals of its co-brand card deals.

· AmEx’s quarterly results swung to a loss of $1.2 billion, or $1.41 a share, from profit of $825 million, or 88 cents, a year earlier. Adjusted earnings per share, which excluded the impact of the $2.6 billion charge, were $1.58. Analysts surveyed by Bloomberg had estimated adjusted earnings would be $1.54.

· The company set aside $833 million for bad loans, an 8.3 percent boost compared with the prior three-month period, as delinquencies climbed.

· Worldwide billed business, a measure of customer card spending, increased 11 percent from a year ago to $291.4 billion.

· The average discount rate, a measure of the fees AmEx charges merchants, slipped to 2.4 percent from 2.42 percent in the prior quarter.

12/05/2017 – Bethesda, MD

Marriott International (NASDAQ: MAR) today announced it reached new agreements with JPMorgan Chase and American Express for its U.S.-issued, co-brand credit cards associated with its loyalty programs. These multi-year agreements will extend Marriott’s relationship with both card issuers and cover the Marriott Rewards and Ritz-Carlton Rewards Visa credit cards from JPMorgan Chase, and the Starwood Preferred Guest (SPG) credit cards from American Express.

“Marriott’s co-brand credit cards have been a meaningful contributor to the success of Marriott’s loyalty programs and a sign of the extraordinary value of our portfolio of brands,” said Arne Sorenson, Marriott International’s President and Chief Executive Officer. “We are pleased to bring together the power of JPMorgan Chase and American Express with our global portfolio of brands to continue to provide consumers with choices. We expect our loyalty program members, owners and franchisees, and our shareholders will see significant incremental benefits from these new agreements.”    

Marriott expects to introduce new, co-brand products starting in 2018 with enhanced member benefits – super-premium consumer and small business co-branded products from American Express and mass consumer and premium consumer co-branded products from JPMorgan Chase. Additional details on the future products will be shared in 2018. In the meantime, both companies will retain their existing portfolio of accounts and continue to offer their current products.

“We are excited to build on our long-term partnership with Marriott and look forward to continuing to serve our mutual customers with the products and experiences they love,” said Jennifer Piepszak, CEO of Chase Card Services. “Together, we also plan to invest in new mass and premium consumer products that will bring choice and variety to the marketplace, along with the depth and breadth of Marriott International’s portfolio of brands.”

“The American Express relationship with Marriott dates back more than sixty years and we are pleased to continue an important component of our partnership,” said Glenda McNeal, President, Strategic Partnerships at American Express. “We’ll continue to provide our Starwood Preferred Guest Card Members with the award-winning benefits, services and experiences they have come to enjoy on their existing product, while building our portfolio within the family of Marriott brands to serve affluent travelers and small businesses.”

For now, there will be no changes to Marriott’s existing co-brand cards for members. Members using the Marriott Rewards and The Ritz-Carlton Rewards Visa credit cards from JPMorgan Chase, as well as the Starwood Preferred Guest credit cards from American Express will continue to earn and redeem points as usual. SPG members in the U.S. can earn two Starpoints® for every eligible dollar spent using the Starwood Preferred Guest credit cards by American Express directly at hotels participating in SPG and Marriott Rewards globally. In addition, Marriott Rewards and The Ritz-Carlton Rewards members in the U.S. can earn five Rewards points for every eligible dollar spent using the JPMorgan Chase Marriott Rewards and The Ritz-Carlton Rewards Visa credit cards on qualifying purchases made at participating global Marriott Rewards and SPG properties.

These credit card agreements are the latest example of the significant economies of scale and competitive advantage that are resulting from Marriott’s acquisition of Starwood Hotels & Resorts. In late 2018, Marriott expects to launch a single technology platform for Marriott Rewards, which includes The Ritz-Carlton Rewards, and SPG. This should enable the company to synch the technology-dependent components of each program, further reducing costs. The new technology platform will also take Marriott one step closer to the goal of having a single loyalty program for the company’s 100+ million members in the current Rewards and SPG loyalty programs.

June 01, 2017  |  This information originated in American English.

MCLEAN, Va. and NEW YORK - Hilton (NYSE: HLT) today announced that American Express (NYSE: AXP) has been selected as the exclusive issuer for Hilton Honors co-branded credit cards in the United States, beginning January 1, 2018. The announcement follows a comprehensive and competitive bidding process aimed at creating long-term value for both companies, hotel owners, guests and Hilton Honors members. The terms of the new multi-year partnership remain confidential.

There will be no immediate changes for existing U.S. cardholders, and purchases made on existing co-branded credit cards will continue to earn Hilton Honors Points. Additional information will be made available later this year.

"Hilton continues to focus on adding new benefits for our Hilton Honors members," said Mark Weinstein, senior vice president and Global Head of Customer Engagement, Loyalty & Partnerships, Hilton. "We are excited to work with American Express on new ways to enhance value for our most loyal guests."

Hilton is American Express' first and longest co-brand card relationship, with the companies beginning their co-branded card partnership in 1995. Hilton has also been an American Express Card-accepting merchant since 1969.The relationship has expanded over the years to include a multitude of travel programs for the companies' shared customers.

"We are very happy to expand upon our five-decade relationship with Hilton to deliver exceptional experiences, services and value to our shared customers," said Eva Reda, senior vice president, Co-Brand Partnerships, American Express. "Through our expanded partnership, we will continue to ensure that Card Members get even more value out of their Hilton Honors and American Express memberships."

Hilton first offered co-branded cards with Citi in 2000. The company would like to acknowledge, and thank Citi for the long and successful co-branded relationship.

Capital One is selected by Bass Pro Shops in conjunction with its winning bid to acquire Cabela's

MCLEAN, Va., Oct. 3, 2016 /PRNewswire/ -- Capital One Financial Corporation (NYSE: COF) today announced that it has entered into a 10-year program agreement to become the exclusive issuing partner of co-branded credit cards to Cabela'scustomers.  This agreement will become effective concurrent with Bass Pro Shops' completion of its proposed acquisition of Cabela's that also was announced today.

"This partnership is an appealing strategic and financial opportunity, and plays to our strengths in the retail card partnership space," said Jimmy Cannon, Executive Vice President, Card Partnerships at Capital One. "Brand loyalty has been a hallmark for both Bass Pro Shops and Cabela's and, together, we are looking forward to building on the strength of those relationships by providing customers with a rewarding experience."

In connection with the Cabela's credit card program, Capital One has entered into a definitive agreement under which it will acquire the credit card operation from Cabela's, including approximately $5.2 billion in credit card receivables and other assets and approximately $5 billion in associated funding liabilities.

Capital One will acquire Cabela's credit card operations for par value of the credit card receivables, less the par value of assumed liabilities. The agreement includes revenue and loss sharing provisions for the ongoing credit card program.

Capital One expects this partnership to provide a strong platform for future growth and returns in its Partnerships credit card business. Capital One does not expect this acquisition to impact its approved capital distribution plan described in its Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2016.  

"We are pleased to partner with Capital One, a leading financial institution with a long track record of successfully operating programs similar to our CLUB Visa portfolio," said Tommy Millner, Cabela's Chief Executive Officer. "This agreement aligns Cabela's with a strong partner that is committed to operating this program with the same care and customer-focused approach as Cabela's has provided since its inception."

Johnny Morris, founder and CEO of Bass Pro Shops, said, "Cabela's has developed a remarkably loyal base of credit card customers and we look forward to partnering with Capital One as we continue to provide those customers with tremendous service as part of the Bass Pro Shops' family."

The Cabela's credit card program transaction, including the acquisition of Cabela's credit card operations, is expected to close in the first half of 2017, subject to the concurrent closing of Bass Pro Shops' acquisition of Cabela's, regulatory approval and the satisfaction of other customary closing conditions.