Consumers soon could be paying no more than $8 for late credit card payments
The Consumer Financial Protection Bureau (CFPB) is proposing a new rule that would effectively cap credit card late fees at $8. The current maximum fee is set at $41 due to a provision in existing law that allows fee increases to be tied to inflation.
The CFPB notes that American families pay $12 billion a year in credit card late fees. The new proposal would reduce late fee payments by about $9 billion a year.
“Over a decade ago, Congress banned excessive credit card late fees, but companies have exploited a regulatory loophole that has allowed them to escape scrutiny for charging an otherwise illegal junk fee,” said CFPB Director Rohit Chopra. “Today’s proposed rule seeks to save families billions of dollars and ensure the credit card market is fair and competitive.”
When someone misses a payment due date, even if they paid a few hours after the deadline, the cardholder may be hit with an exorbitant late fee that far exceeds the credit card company’s costs to collect late payments.
Companies currently charge people as much as $41 for each missed payment, and these fees result in billions of dollars in annual junk fee revenue for credit card companies.
The proposed rule would take steps to rein-in late fees. These include a regulatory cap of $8 per late fee as the standard for "reasonable" fees. The second cap would say that the card issuer may not charge a card holder more than 25% of the minimum payment amount as a late fee. The card issuer, then, could charge a late fee of 25% of the minimum payment due with a maximum fee of $8. The CFPB notes this change allows card issuers to recover any collection costs while alleviating a financial burden to consumers.
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