The Consumer Financial Protection Bureau (CFPB) has backed off a plan to limit upfront fees on credit cards.  This move affect hit borrowers with poor credit histories the hardest.
The CFPB acknowledged that their revised plan will allow banks to charge more in fees and thereby increase costs for some cardholders.

Bill Bartmann, a financial lawyer and debt-collection executive called the decision “strategic thinking” on the part of Richard Cordray, director of the CFPB.  Bartmann, generally a supporter of the CFPB, said, “he’s picking battles, and it’s unrealistic to think you can win them all.”

Those with poor credit histories are called subprime borrowers and are charged higher fees because they pose a greater risk to a financial institution, than someone with a strong credit past.  Banks are concerned that by limiting fees, they will stop lending to subprime borrowers altogether.

Current rules say banks cannot charge fees totaling more than 25% of a person’s credit limit in the first year of the account, but there are no limits on the fees a lender can charge before the card is activated.  The current ruling allows the continuation of unlimited upfront fees.  These are generally called processing or activation fees.

The decision by the CFPB shows that they will side with banks/financial institutions when they deem the decision appropriate.  It’s too early to judge, but maybe they are taking a pragmatic pragmatic approach when balancing consumer rights with business needs.  We’ll see.