Consumer agency softens credit fee limits

The Obama administration's consumer financial watchdog agency is backing off a plan to limit big upfront fees on credit cards, a move that could hit borrowers with poor credit histories especially hard.

The Consumer Financial Protection Bureau acknowledged Thursday that its proposal would increase costs for some cardholders and allow banks to charge more in fees.

The CFPB was set up after the financial crisis to protect consumers from loans and cards with hidden fees or other traps. Thursday's decision shows the difficult line the young agency must walk, allowing banks to make enough money so that they can continue to offer loans and cards while protecting consumers from fees that it considers abusive or deceptive.

Bill Bartmann, a financial lawyer and debt-collection executive who generally supports the agency, called it "strategic thinking" on the part of Richard Cordray, the agency's director.

"He's picking battles, and it's unrealistic to think you can win them all," said Bartmann, who publishes a widely read newsletter on financial regulation.

Fee limits are of particular concern to borrowers with weak credit, including so-called subprime borrowers, and the companies that seek to lend to them.