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White House to cap credit card late payment fees

White House to cap credit card late payment fees

The Biden administration is taking aim at credit card late payment fees in a move that it says could save Americans $9 billion a year.

The Consumer Financial Protection Bureau (CFPB) proposal would cap late fees at $8, down from the current average of around $30.

The watchdog says that even if someone makes a payment just a few hours after the deadline they may be hit with an exorbitant late fee that far exceeds the credit card company’s collection costs.

The proposed rule would also end automatic annual inflation adjustment and ban late fee amounts above 25% of the consumer’s required payment.

CFPB director Rohit Chopra says: "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.

“Today’s proposed rule seeks to save families billions of dollars and ensure the credit card market is fair and competitive.”

The plan now faces a comment period before going into effect next year.

Comments: (1)

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 02 February, 2023, 11:49Be the first to give this comment the thumbs up 0 likes

Feh on such an egregious instance of price control! Late Fees is between Credit Card Issuer and Credit Cardholder. Third parties have no business interfering, that too in a case when the charge is triggered by sheer negligence on the part of one party and not by any duress caused by the other.  

I've heard of so many proposals from CFPB accompanied by lofty sermons by Rohit Chopra. Does anyone know how many of them have actually become rules?

When Plaid et al have already used free market ethos to generate 80M users for "Open Banking" apps in USA without any regulation, I really don't see what CFPB's proposal on Dodd-Frank s1033 is going to achieve.