The CFPB rule caps credit card late fees at $8

the new a basewhich had long been expected after the initial proposal was floated early last year, comes after the agency said it reviewed market data related to the CARD Act of 2009. Regulations associated with that law gave card issuers the ability to charge ever-increasing amounts of late fees.

“For more than a decade, credit card giants have been exploiting a loophole to reap billions of dollars in unwanted charges from American consumers,” CFPB Director Rohit Chopra said in the statement. “Today’s rule ends the era of major credit card companies hiding behind the excuse of inflation when they raise fees on borrowers and boost their bottom lines.”

The announcement is the latest attack in President Joe Biden's war against so-called junk fees.

Big banks that issue credit cards have been raising the cost of late penalties since 2010, and fees exceeded $14 billion in 2022, according to the CFPB. The industry takes advantage of customers with low credit scores, who receive an average of $138 per year in late fees per card, He said Chopra.

The rule, which applies to card issuers with at least 1 million open accounts, ends automatic inflation adjustments on late fees.

Instead, the agency said it will adjust fees if necessary to cover collection costs, and card issuers can charge higher fees if they prove they are necessary. The rule does not directly affect interest rates, the CFPB said.

An industry group criticized the CFPB's rule Tuesday, saying many card users will see higher interest rates and reduced credit availability. The group also questioned the process by which the rule was issued. The CFPB says Congress gave it the authority to administer the CARD Act.

See also  The Dow jumped 150 points on Friday as investors shed fears of rising interest rates

“The rule’s policy goals are, at best, consumer redistribution, not consumer protection,” Lindsey Johnson, president of the Consumer Bankers Association, said in a statement. “Equally troubling is that this rule continues the CFPB’s very problematic practice of rushing to prioritize headlines at the expense of the legal process.”

Another industry group, the American Bankers Association, said it was considering options to respond to the CFPB rules.

In a statement, Republican Senator Tim Scott from South Carolina said he would rely on… Congressional Review Act To fight implementation of the CFPB rule.

Leave a Reply

Your email address will not be published. Required fields are marked *