The White House is gearing up for a battle with congressional Republicans over credit card fees as part of its broader message on controlling costs for consumers.
Tuesday’s announcement of a Consumer Financial Protection Bureau final rule designed to limit the late fees charged by major credit card lenders to about $8 was just one of many pegged to a meeting of President Joe Biden’s Competition Council ahead of Thursday’s State of the Union address, but it sets up one of the most obvious contrasts with Republicans on Capitol Hill.
The rule “will help stop some credit card companies from ripping you off with late fees,” Biden said, adding that current law says banks are only supposed to charge consumers what it costs to collect the late payment. “But we estimate banks are collecting five times more in late fees than it costs to collect late payment.”
“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.” CFPB Director Rohit Chopra said in a statement.
Sen. Tim Scott, the South Carolina Republican considered a contender to be former President Donald Trump’s running mate and the ranking member of the Senate Banking Committee, said Tuesday that he intended to use the Congressional Review Act’s expedited procedures to seek to nullify the rule.
“While lowering the cap on late penalties may sound like a good talking point, in practice it will decrease the availability of credit card products for those who need it most, raise rates for many borrowers who carry a balance but pay on time, and increase the likelihood of late payments across the board,” Scott said in a statement. “Lawful and contractually agreed upon payment incentives promote financial discipline and responsibility.”
The fight was expected.
When Chopra testified about the proposed rule at a Senate Banking hearing last June, he faced plenty of questions from Scott and other Republican senators about the potential consequences for borrowers. Chopra told reporters Monday that the rule would affect credit card issuers with over 1 million open accounts, not issuers like small banks and credit unions.
“We did not find evidence these smaller companies are employing the fee-churning business model, and in fact they generally charge much lower fees overall,” he said.
There were a number of other announcements tied to Tuesday’s sixth meeting of the Competition Council, affecting industries from health care to agriculture and housing. On the health policy front, the Biden administration is scrutinizing health care prices as part of a broader “strike force” initiative on consumer costs. Briefing reporters ahead of the formal announcements, Federal Trade Commission Chair Lina Khan pointed to the agency’s ongoing work on pharmacy benefit managers and health care mergers.
She also noted the agency’s successful challenge of dozens of drug patents in the Food and Drug Administration’s Orange Book, a registry of pharmaceutical patents that can grant drugmakers additional market exclusivity for improperly listed products.
On Tuesday, much of the president’s focus was on what’s called “shrinkflation” in which less product may be put in the same sized retail packaging.
The president cited the example of snack foods, saying “they charge you just as much for the same-sized bag of potato chips, only there’s a hell of lot fewer chips in it.”
The White House responded after Cookie Monster, the Sesame Street character, posted on X Monday that “Me hate shrinkflation! Me cookies are getting smaller.” The exchange led White House Press Secretary Karine Jean-Pierre to say at Tuesday’s White House press briefing that, “I can’t believe I’m having a conversation about the Cookie Monster at the podium.”
Lauren Clason contributed to this report.
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