Arad Levertov is the CEO and a cofounder of the payments company Sunbit, which provides credit card services as well as payments tools enabling consumers to pay for in-person transactions over time. He is based in the Los Angeles area.
While the Consumer Financial Protection Bureau’s decision on March 5, 2024, to limit credit card late fees is not popular among industry insiders, we believe it is the right decision.
Consumer credit plays an important role in our society, and card issuers have every right and expectation to build successful, profitable businesses. But there is a better way to do this than to charge sizable late fees.
The CFPB 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.
Arad Levertov
Permission granted by Bridget Stasonis
When late fees for the biggest card issuers are 9% of operating revenue on average — but scaling to approximately 20% or higher — you are essentially betting against the American consumer.
Hefty and frequent fees have become so pervasive that the industry needs to rediscover perspective on what consumers deserve.
Instead of simply relying on maintaining the status quo and arguing to protect high fees, the consumer credit card industry should ask who it serves, and what value it offers.
Focus on who you serve — and what value you offer — the rest will follow.
The credit card industry should take a page from innovators instead of relying on yesterday’s fee models.
Despite the various fee disclosures, consumers who are hit with them still often feel that they are unexpected. No one expects to be late, so they might not understand or pay attention to that cost upfront. Instead of fighting for high fees, compete by serving the customer better and look for other places to create revenue.
Innovators are usually new and have a fresh perspective. They get into the business because they see something that is broken and should be improved.
I see innovation across all areas of consumer finance from best-in-class fintech, where companies actively seek to serve more consumers with better products that do more with less and create better customer experiences. At the same time, they are investing in building symbiotic, positive relationships with real people over time.
Those customers who have better experiences now — they will come to expect them. They will tell their friends and their families. They will quietly move to card issuers that offer better choices than in the past.
In just a few short years, those still depending on fee-based revenue will see customers looking for better choices — and finding them.
A focus on bringing actual value to life through advanced technology and systems can help make consumer credit innovation possible.
Our position has always been that business success should not come at the expense of consumers.
While the CFPB’s credit card late fee limits might not hold, I am confident that the pressure to increase transparency and consumer-friendly decisions and products will grow in the coming years.
