Imagine a regulatory body of the United States government deciding that people who pay their bills should subsidize those who don’t.

Well, imagine no more. The constitutionally dubious Consumer Financial Protection Board (CFPB) has a proposed rule (Regulation Z) that would lower the penalty fee for failing to pay credit-card debt on time from $30 to $8. While this may seem like a good thing, it actually would have the perverse effect of shifting the burden to cover late costs to the broader consumer through higher interest rates. 

In a recent hearing with the CFPB Director Rohit Chopra, U.S. Rep. Ann Wagner (R–Missouri) asked him, “why should responsible cardholders, who pay their bills on time and typically never pay late fees, be forced to subsidize frequent late payers?”

Wagner further pointed to the actual proposed rule which says that the 74 percent of all Americans with credit cards who never pay a late fee, could experience “higher maintenance fees and lower rewards.”

What could go wrong with a regulation where those who do the right thing get punished to benefit those who don’t?

Unfortunately, a lot can go wrong.

Smaller banks are particularly vulnerable as many of them have been under extreme financial pressure since the failure of Silicon Valley Bank earlier this year. Federal law requires that small businesses have unique protections against a regulation that would do significant economic damage to a substantial number of them. 

The Office of Advocacy of the U.S. Small Business Administration is arguing to the CFPB that this regulation does real harm to smaller banks and credit unions and is formally protesting the CFPB decision to disregard this harm as speculation which did not command a factual foundation.

Given Treasury Secretary Janet Yellen’s mid-November warning that more bank mergers may necessary in the wake of regional-bank failures, prudence demands that the CFPB not exacerbate the financial pressures on smaller banks through a consumer cost-shifting scheme that does direct harm to those institutions that are most vulnerable to the Biden administration’s high interest-rate policy.

Beyond the unintended consequence of a likely increased consolidation of the banking industry due to the CFPB’s ill-conceived regulation, the core philosophical issue remains, the regulatory punishment of those who pay their bills to alleviate negative consequences for those who don’t. 

Senator Steve Daines (R–Montana) posed exactly the right question to Chopra in a recent hearing, “So, my question is, why would your agency proceed with a rule they would potentially cause hardship to those it actually seeks to help?”

The obvious answer is that they don’t care about the vast majority of consumers, instead focusing only on scoring points with a select group in the hopes of gaining political favor in November. Consequences to consumers and smaller banking institutions be damned.        

Rick Manning is the president of the Americans for Limited Government Foundation.

Back in mid-November, when President Joe Biden signed the latest stopgap funding bill to keep the government operating, official Washington, D.C. no doubt heaved a sigh of relief. The measure, which originated in the fractious House, passed there only with support from the Democratic minority — in fact, many more Democrats than Republicans voted for it, even though it was put together by the GOP leadership. It was signed a day before the federal government was due to shut down, and keeps some agencies and departments operating until Jan. 19 and the rest until Feb. 2.

Plenty of others have commented in print and online about the unusual two-tiered structure of the bill and what it accomplishes — painfully little, say many conservatives, while many Democrats and liberal commentators give GOP House Speaker Mike Johnson credit for at least keeping the government operating and buying time for Congress to do what it’s supposed to do: fund the government through the regular appropriations process. As longtime journalist Karen Tumulty put it in the Washington Post, the measure “is a challenge to Congress to get back to working in the more orderly fashion it was designed to operate in. What Johnson is trying to do — and it’s an admirable goal — is nudge the appropriations committees of both houses to get back to doing their jobs…”

The question, of course, is whether they can pull it off. This was the second stopgap funding measure this year, and the Republican caucus in the House is no less divided than it was, leading to plenty of trepidation about what will happen as the January and February deadlines approach.

All I can say is, I fervently hope Congress gets back on track with the appropriations process, because believe me, this is a terrible way to run a government. Even when Congress steps back from the brink of a shutdown, it’s damaging. Government employees may become inured to the threat, but it’s demoralizing and distracting, nonetheless. Our economy needs to be able to operate with some certainty about what the government will be doing — repeated brinksmanship ripples through both the business and nonprofit sectors. And perhaps more than anything, there’s a huge cost in terms of the time and effort agencies have to put into figuring out how to manage a shutdown —which they have to do well in advance. It means they can’t turn their attention to any long-term effort to plan or improve. Shutdown threats, in other words, are highly disruptive.

And that’s not even to mention the cost of an actual shutdown. A report a few years ago by the Senate Permanent Subcommittee on Investigations found that the previous three shutdowns had cost taxpayers nearly $4 billion in back pay to furloughed workers and other costs, including extra administrative work, lost revenue, and late fees on interest payments owed by the government. In other words, stopping the government is no cost-saving measure.

The impact on the public, of course, is also measurable. Beneficiaries of aid programs (SNAP and other nutrition programs, for instance) face huge uncertainty about whether they’ll make it week to week; loan programs are suspended, affecting small businesses, farmers, and others; the national parks and other government-funded attractions close, putting a dent in local tourist economies; and furloughed federal workers, even with the promise of back pay, sometimes begin looking for other work, while government recruiters find it tougher to find qualified candidates willing to put up with that kind of disruption.

As Congress debated this most recent funding measure, House Speaker Johnson said that his goal was to get Congress back to voting on individual appropriations bills — and to avoid stopgap funding and massive omnibus bills in the future. That’s an admirable ambition. We can only hope that enough of his colleagues agree that, early next year, they don’t drag the U.S. through another shutdown drama.      

Lee Hamilton, 92, is a senior advisor for the Indiana University (IU) Center on Representative Government, distinguished scholar at the IU Hamilton Lugar School of Global and International Studies, and professor of practice at the IU O’Neill School of Public and Environmental Affairs. Hamilton, a Democrat, was a member of the U.S. House of Representatives for 34 years (1965-1999), representing a district in south-central Indiana.