Consumers Cheer, Bankers Boo as Credit Card Late Fee Cap Looms
Consumer bureau takes action to end some junk fees
Banking interest groups are panicking at the announcement that the Consumer Financial Protection Bureau (CFPB) plans to implement a rule that would cap credit card late fees at $8.
The move is great news for consumers, who currently pay about $12 billion annually in late fees to credit card issuers. These fees may be incurred even if the payment is made just a few hours after a cutoff point.
The move comes as the CFPB is examining what it calls “junk fees” that are profit centers for banks and other financial institutions but serve little purpose in enhancing the customer experience or improving product offerings.
“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.”
While current rules allow late fees to be as high as $41, the new rule, once implemented, would cap these fees at $8. That represents a savings to families of $9 billion a year.
