Synchrony isn’t sweating CFPB scrutiny of late fees, CEO says


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Synchrony Financial is closely monitoring the possibility that regulators will curb late fees across the credit card industry, but it’s not overly concerned about the potential revenue impact, executives said Friday.

Analysts asked about credit card late fees during the company’s earnings call, which took place two days after Consumer Financial Protection Bureau Director Rohit Chopra announced a broad review of what he called “junk fees.”

Synchrony President and CEO Brian Doubles said the Stamford, Connecticut, card issuer does not charge many fees aside from late-payment penalties — and that those are transparent, “completely compliant” with the CFPB’s guidance and in line with its competitors’ charges.

Synchrony Financial executives said Friday that if new limits on credit card late fees were enacted, the company would negotiate with its retail partners to rework their arrangements.

The çonsumer bureau currently allows credit card issuers to charge customers up to $30 for a first late payment and $41 for subsequent violations.

“If something were to change on that front, we could price for it in other ways and protect our revenue and our margin,” Doubles said during the $95.8 billion-asset company’s earnings call.

Chief Financial Officer Brian Wenzel likened the situation to the aftermath of the passage of the Credit Card Accountability, Responsibility, and Disclosure Act in 2009, which put certain limits on fees. Nonetheless, Synchrony’s revenues stayed roughly the same, Wenzel said.

Synchrony, which issues credit cards on behalf of retailers, consulted with its partners after the CARD Act took effect to rework their arrangements in light of the new rules, Wenzel said. Synchrony’s current partners include retailers like Lowe’s, Sam’s Club, JCPenney and Crate and Barrel, as well as Amazon, Walgreens, PayPal and Verizon.

In an interview, Wenzel said that any negotiations with the company’s partners following a possible CFPB action on late fees would be different depending on the program. Each store-branded card is a three-legged stool, he said, with a pool of benefits for cardholders, the merchant and Synchrony.

“If that pool shrinks, you then look at those three legs of the stool and say, How would you adjust any of those?” Wenzel said.

But he also said that the CFPB appears to be more focused on hidden fees that mask the total cost of a purchase, rather than what he characterized as Synchrony’s “pretty straightforward” late-payment penalties, which operate under the CFPB’s safe-harbor fee limits.

Isaac Boltansky, director of policy research at BTIG, wrote in a research note Friday that the CFPB’s actions on credit card issuers are likely to be “limited.” While the industry did charge an “eye-popping” $23.6 billion in fees in 2019, credit card charges align with the maximum amounts set in the CARD Act, Boltansky wrote.

“Despite this headline, we continue to believe that the credit card segment is relatively safe from a regulatory perspective,” he wrote.

The CFPB’s review covers a wide range of bank fees, including late fees, overdraft fees, ATM fees and deposit account maintenance fees. It also encompasses fees in areas such as home appraisals, payday loans and remittances.

Boltansky flagged deferred-interest offerings — where cardholders have to pay interest accrued over a promotional period if they don’t pay their balance in full before that period ends — as a potential area of scrutiny.

Synchrony recently underwent a CFPB investigation in connection with deferred interest products. In January 2021, CFPB officials informed the company that they were not recommending an enforcement action after years of investigation, according to a Synchrony regulatory filing.

The CFPB wants to ensure that any such offerings are transparent to consumers, Wenzel said. He also said that Synchrony is “comfortable that we have some of the best in class” procedures on promotional financing.

“I actually hope that some of the things that we do with regard to disclosures and being transparent to consumers are actually transported to everyone in the industry that doesn’t do that,” Wenzel said.

Synchrony’s earnings rose to $813 million, or $1.48 per diluted share, in the fourth quarter of 2021. That was up from $738 million, or $1.24 per diluted share, a year earlier.