The Consumer Financial Protection Bureau on Wednesday proposed lowering late fees that credit card companies can charge without legal challenge by at least 73 percent, to $8.
The change, if finalized, would save consumers up to $9 billion a year, according to the agency. The proposal is part of a bigger push by the White House to lower fees paid by consumers, including those charged by airlines and ticket sales platforms.
“While it may be fair to charge customers for extra costs that credit card companies are incurring, that’s not what we see here,” CFPB Director Rohit Chopra said Tuesday on a press call.
[Biden to Congress: Eliminate ‘junk’ fees for resorts, cable, airlines]
Late fees charged by credit card companies must be “reasonable and proportional” to the costs they incur to collect the debt under a 2009 law establishing consumer protections for the industry. The law didn’t specify a dollar amount for late fees, but regulators said companies charging up to $30 for an initial late fee and $41 for subsequent late payments would be considered in compliance.
“We found that over time, this loophole has morphed into a multibillion-dollar bonanza,” Chopra said, adding that consumers pay $12 billion a year in late fees. “We worry that credit card companies are actually hoping that consumers are a day or two late so that they can cash in on fees.”
The CFPB’s proposal would generally allow late fees up to $8 and eliminate automatic annual inflation increases. Companies could still charge fees higher than $8 if they could show it was needed to cover their collection costs.
The proposal would also bar credit cards from charging late fees that are more than a quarter of the outstanding balance.
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