The Consumer Financial Protection Bureau (CFPB) has finalized a rule to cut late payment fees from credit card companies, aiming to reduce the average fee by 75 percent and save U.S. consumers an estimated $220 annually. The rule is expected to save Americans over $10 billion in late fees each year, lowering the typical fee from $32 to $8.
According to The Hill, the White House sees this as part of a broader effort by the Biden administration to eliminate "junk fees" in the financial sector. Senate Republicans, however, oppose the rule, arguing that fees promote financial discipline. Senate Banking Committee member Tim Scott (R-S.C.) plans to use the Congressional Review Act to block the rule, set to take effect in 60 days.
Consumer advocacy groups applaud the lowered credit card fees, emphasizing the impact on economically vulnerable families. Industry groups like the U.S. Chamber of Commerce and the American Bankers Association oppose the change, citing concerns about increased late payments, higher debt, lower credit scores, and reduced credit access.
The rule change, strategically announced days before President Biden's State of the Union address, follows a White House initiative to combat price gouging contributing to post-pandemic inflation. National economic adviser Lael Brainard criticized corporations for not passing on savings to consumers, resorting instead to extra fees, reported CBS News.
CFPB's findings indicate a steady rise in credit card fees since the 2009 overhaul of credit card laws, with companies charging a record $130 billion in interest and fees in 2022. The average late fee for major issuers increased from $23 in 2010 to $32 in 2022, becoming a significant profit driver for some credit card companies.
