The Consumer Financial Protection Bureau (CFPB) has finalized a rule that limits the typical credit card late fee from $32, to $8.
The rule, which was proposed in early 2022, closes a loophole exploited by large credit card issuers and applies to issuers with more than one million open accounts, the CFPB said. This translates into more than 95% of total outstanding credit card balances. Data shows that smaller issues tend to have lower rates and fees, it added.
Reducing the late fee to $8 will save consumers $10 billion a year, or an annual average of $220 for each of more than 45 million people, the Biden administration said in a statement today (March 5) in announcing several initiatives aimed at fighting junk fees.
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The rule immediately met with criticism from several groups including the U.S. Chamber of Commerce, which said it plans on filing a lawsuit against the CFPB to block the rule.
"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," the Chamber said in a statement.
The CFPB move builds off of steps it has already taken in the banking sector as part of the administration's war on junk fees. In January, for example, the agency proposed curbing bank overdraft fees. It has also fined several financial institutions in the last year, such as Bank of America, over junk fees.
The final rule does not affect the ability of large credit card issuers to raise interest rates, reduce credit lines and take other actions to prevent late payments, the CFPB said. “In fact, the rule would increase the desire for credit card companies to facilitate on-time payment, since it would lower incentives to build a business model on late fees,” the agency added.
New strike force to fight unfair pricing
The administration also announced the launch of a new strike force, co-chaired by the Department of Justice and Federal Trade Commission, to crack down on unfair and illegal pricing tactics by corporations that “try to rip off Americans." The strike force will focus on key sectors including prescription drugs and health care, food and grocery, housing as well as financial services.
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