Federal Regulators Cap Most Credit Card Late Fees At $8

March 6, 2024
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Today’s rule closes a longstanding loophole abused by credit card giants to turn late fees into a major revenue stream.

Consumer Financial Protection Bureau (CFPB) spokesperson Sam Gilford after federal regulators announced a rule on Tuesday that most credit card late fees will be capped at $8 (fees average $32).

Why It Matters: The rule applies to major credit companies that have 1 million+ accounts, which account for the majority of credit card debt. The government says the new rule (currently set to take effect in June) will save millions of Americans with late fees an average of $220 each year. In its announcement on the new rule, the CFBP also notes, “Larger card issuers will be able to charge fees above the threshold so long as they can prove the higher fee is necessary to cover their actual collection costs.”

The move is part of the Biden administration’s broader plan to minimize “junk fees,” otherwise known to the Federal Trade Commission as fees with “unnecessary, unavoidable, or surprise charges that inflate costs while adding little to no value.“ However, others argue this sort of regulation will lead to prices raising elsewhere, including for those who normally don’t have late fees.

“Today’s announcement is a prime example of how the CFPB has been politicized, and how its regulatory actions promote rhetoric over analysis and data,” CEO of the Bank Policy Institute, Greg Baer, after federal regulators made the new rule official. Meanwhile, the U.S. Chamber of Commerce says it will file a lawsuit against the CFBP in an attempt to prevent the new rule from going into effect, citing government overreach.

Read More: Federal Trade Commission Explores Rule Cracking Down on Junk Fees (FTC)

Credit card late fees cost Americans billions a year — now they’re capped at $8 (CNBC)

Credit card late fees capped at $8 as part of Biden crackdown on junk fees (CNN)

by Emily Hooker, based in Texas

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