Consumer Bureau finalizes rule to eliminate credit card junk fee
Customers who make late payments on their credit cards will now see the late fee penalty capped at $8, thanks to a federal rule finalized today by the Consumer Financial Protection Bureau (CFPB).
The CFPB proposed the fee cap last year and finalized it after months of hearing comments from consumers and the banking and credit card industry.
“For over a decade, credit card giants have been exploiting a loophole to harvest billions of dollars in junk fees from American consumers,” said CFPB Director Rohit Chopra. “Today's rule ends the era of big credit card companies hiding behind the excuse of inflation when they hike fees on borrowers and boost their own bottom lines."
A CFPB report in early 2023 noted that consumers paid $14.5 billion in late fees in 2022.
That same report notes that consumers pay between $30 and $40 for each late payment and that the typical late payment is made within two days of the due date.
The CFPB's final rule says that $8 is sufficient for credit card companies to recover the actual costs associated with handling late payments. The rule also eliminates a provision in federal law that allowed for inflationary adjustments.
Credit card companies seeking to charge more than the $8 maximum late fee must demonstrate to the CFPB that a higher fee is necessary to recoup costs.
Estimates by the CFPB suggest consumers will save as much as $10 billion once the new fee cap goes into effect. The rule will become effective 60 days from today.
Consumer advocates were quick to applaud the move.
Amanda Jackson, director of consumer campaigns at Americans for Financial Reform, said the new rule eliminates a "nasty" fee.
"There are changes that fiddle at the edges of a problem and there are reforms like this one that will save consumers billions each year by slashing a particularly nasty kind of junk fee."
