Consumer Law

A Nudge to Make Timely Credit Card Payments

By Jeff Sovern

One of the things I love about the new amendments to Regulation Z is that they require that credit card monthly statements have a "Late Payment Warning" next to the payment due date.  The Late Payment Warning advises consumers that failure to pay on time may result in imposition of a late fee and cause an increase in their interest rate.  Proximity to the due date appears likely to increase its effectiveness.  You can see how it looks here.  This seems like the kind of libertarian paternalism urged in Richard H. Thaler and Cass R. Sunstein's book Nudge (about which we blogged here)--a rule that might change behavior for the better but still preserves consumer choice.  It will be interesting to see if this nudge reduces late credit card payments after it is implemented.  I gather that this nudge, together with another, the nearby "Minimum Payment Warning," which gives consumers information about how long it will take to pay off balances if they make only the minimum payments, are products of the 2005 bankruptcy legislation.

Full post as published by CL&P Blog on January 14, 2009 (boomark / email).