A final rule prevents credit card companies from charging late fees higher than $8. The Consumer Financial Protection Bureau passed the rule in an effort to save 45 million people an average of $220 or more than $10 billion a year.
With late fees said to be a major contributor to the more than $1 trillion in outstanding credit card debt reported in 2022, the late fee cap of $8 is down from an average of $30, new analysis from Accountable.US, a government watchdog group, revealed.
“The Biden administration’s latest crackdown on needless junk fees won’t just lower costs for millions of Americans, it will put billions back into the economy to be spent on goods and services instead of padding profits of greedy banks,” Liz Zelnick from Accountable.US said.
The Consumer Financial Protection Bureau (CFPB) identified late fees, which account for 95 percent of consumers’ credit card balances, as “the most significant fee assessed to cardholders in both dollar amount and frequency.” According to Accountable.US, eight of the “largest credit card issuers charged consumers billions in credit card late fees and other service charges in 2023 alone.”
“Big banks have no need to nickel and dime everyday families with hidden, high-cost late fees based on the massive profits they brag about to wealthy investors,” Zelnick said. “Bank industry lobbyists claim junk fees teach responsibility, but families who are price-gouged with late fees as high as $41 buried in the fine print only get a hard lesson in corporate greed.”
The finalized rule already faces significant industry push-back and could be up against legal and legislative attacks from big banks. The CEOs from big banks claim they cannot maintain profits without high-cost late fees and that high credit card fees are beneficial to consumers.
“The agency’s final credit card late fee rule punishes Americans who pay their credit card bills on time by forcing them to pay for those who don’t,” Neil Bradley, executive vice president of the U.S. Chamber of Commerce, said. “The Chamber will be filing a lawsuit against the agency imminently to prevent this misguided and harmful rule from going into effect.”
The CFPB’s crackdown is part of the Biden administration’s broader effort to combat “junk fees.”
“For over a decade, credit card giants have been exploiting a loophole to harvest billions of dollars in junk fees from American consumers,” Rohit Chopra, director of the Consumer Financial Protection Bureau, said. “Today’s rule ends the era of big credit card companies hiding behind the excuse of inflation when they hike fees on borrowers and boost their own bottom lines.”
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