Consumer Financial Protection Bureau proposed to prohibit credit card issuers from hiking late fees with inflation.
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A proposed regulation slashing late-payment fees on credit-card debt could hurt card companies. American Express is better positioned to handle it, RBC said Tuesday.
The Consumer Financial Protection Bureau, an agency responsible for consumer protection, proposed to cut late fees to $8 from what ranged from $31 to $40 in February, and prohibit issuers from hiking late fees with inflation. It could lower late fees by as much as $9 billion per year, CFPB says. The agency asked for public comments earlier this year, and the regulation could go into effect later in 2023, if it isn’t delayed.
The Bank Policy Institute, a trade association, sees “deficiencies” in the proposal, and said that “any final rule that is substantially similar to the proposal would be arbitrary and capricious and contrary to law and would harm the very consumers the proposal purports to benefit.”
With this backdrop, RBC analyst Jon Arfstrom upgraded
American Express
stock (ticker: AXP) on Tuesday to Outperform from Sector Perform, and ticked up the target price to $200 from $197.
“We believe the company’s top-of-wallet status and focus on premium consumers and small-to-medium corporate enterprises results in a much lower reliance on late fees as a meaningful revenue source,” Arfstrom wrote.
American Express hasn’t quantified the explicitly how much of its revenue
stream is tied to late fees, the analyst said.
Write to Karishma Vanjani at [email protected]
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