CFPB Director Rohit Chopra speaks before the Senate Committee on Banking, Housing, and Urban Affairs titled “Consumer Financial Protection Bureau’s Semiannual Submission to Congress,” on Thursday, November 30, 2023, in the Dirksen Building. Testify at the hearing on the report.
Tom Williams | Cq-roll Call Inc | Getty Images
this Consumer Financial Protection Bureau A new rule announced Tuesday says the typical late fee banks charge customers is $8 per incident.
The CFPB said in a news release that by cutting late fees from an average of about $32 to $8, more than 45 million cardholders will save an average of $220 per year.
new ruleThe measure has been anticipated since an initial proposal was made early last year, after the agency said it had reviewed market data related to the 2009 Card Bill. Regulations associated with this law give card issuers the ability to charge ever-increasing late fees.
“For more than a decade, credit card giants have exploited loopholes to collect billions of dollars in junk fees from American consumers,” CFPB Director Rohit Chopra said in a news release. “Today’s rule Ending the era of big credit card companies using inflation as an excuse to raise borrower fees and boost their own profits.”
The announcement is President Joe Biden’s latest move against so-called trash fees.
The big banks that issue credit cards have been raising the cost of overdue fines since 2010, and the fees will exceed $14 billion by 2022, according to the CFPB. The industry profits from customers with lower credit scores, who are charged an average of $138 in late fees per card annually, explain Chopra.
The rule, which applies to card issuers with at least 1 million accounts, also ends automatic inflation adjustments to late fees.
Instead, the agency said it would adjust fees to cover collection costs if needed and could charge higher fees if card issuers prove it’s necessary. The CFPB said the rule would not directly affect interest rates.
An industry group criticized the CFPB’s rules on Tuesday, saying many credit card users will face higher interest rates and less credit available. The group also questioned the process by which the rule was issued. The CFPB said Congress gave it authority to enforce the CARD Act.
“The policy goal of this rule is, at best, consumer redistribution rather than consumer protection,” Consumer Bankers Association President Lindsay Johnson said in a statement. “Equally concerning, this rule continues The CFPB’s deeply problematic approach of rushing to prioritize headlines without regard to legal process.”
Another industry group, the American Bankers Association, said it was considering options to boycott the CFPB rules.
South Carolina Republican Sen. Tim Scott said in a press release that he will rely on Congressional Review Act Strive to implement a cap on late payment fees.
The rules will take effect 60 days after the issuance of the Regulations Federal Register” the CFPB said.
