Banks Threaten to Sue to Preserve Power to Charge Excessive Late Fees

Junk fees represent a multibillion-dollar profit center for banking industry

Andy Spears
3 min readMay 25


Photo by Jp Valery on Unsplash

Consumers are on the verge of a huge win against the powerful banking industry as the Consumer Financial Protection Bureau (CFPB) has announced a new rule that would cap credit card late fees at $8.

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. In fact, 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.

Not surprisingly, banking interests oppose this new fee cap.

American Banker reports:

With billions of dollars at stake, trade groups representing large issuers are threatening to sue the CFPB, once the rule is finalized, for failing to convene a small-business review panel as required by law. Hundreds of small community banks and credit unions claim they will suffer economic harm if the plan goes into effect.

The banking industry says that post-collection costs exceed the $3 billion in revenue they’d collect with an $8 cap.

Alternative explanation: Late fees are a HUGE profit center for banks.

That is, rather than offer MORE service in order to compete for and win customers, banks are happy to make money from late fees.

While it may be true that banks incur costs that exceed the $8 late fee cap, what the industry is NOT doing is talking about the number between $3 billion and $12 billion that would allow them to recoup the costs of managing delinquent accounts.

Rather than filing suit, banks COULD work with the CFPB to find a late fee cap that actually allows them to recover their true costs.

Of course, that would require banks to be open about the huge profits they are making off of the current excessive late fees.

Instead, banks are making clear that consumers are taking a backseat to profits.



Andy Spears

Writer and policy advocate living in Nashville, TN —Public Policy Ph.D. — writes on education policy, consumer affairs, and more . . .