Wednesday, March 6, 2024
"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.
Biden also commented while meeting with his Competition Council. "That's the average of $220 in savings annually for more than 45 million Americans who typically have to pay late fees. A lot of money," he said. "We estimate banks are generated five times more in late fees than it costs to collect late payments. They're padding their profit margins," he said.
In a press release about the new rule, the CFPB stated that banks have been allowed to charge fees far in excess of costs, which means that large banks profit when borrowers inadvertently miss a payment or struggle to pay on time. "Our research shows that borrowers with low credit scores are, on average, charged $138 per year per card, and many consumers have multiple credit cards," the bureau wrote. "The status quo makes late fees an irresistible revenue stream, disincentivizing card companies from making it easy and simple to pay your bill on time."
Today’s rule, the CFPB continued, will help consumers keep more of their money, and hold credit card companies to the original intent of the CARD Act, which "requires large card companies to either charge a maximum late fee of $8, or justify a higher amount by demonstrating that they need to charge more to cover their actual collection costs."
The rule, which applies only to the largest card issuers, those with over 1 million open accounts, also eliminates an automatic inflation adjustment, which was added by the Federal Reserve Board and is not required by law, the bureau added.
The U.S. Chamber of Commerce responded swiftly to the rule, stating it plans to file a lawsuit soon to challenge the regulation. Large issuers, including Capital One Financial Corp., JPMorgan Chase & Co., and Bank of America Corp., and the American Bankers Association are also expected to challenge the rule.
"The Bureau’s misguided decision to cap credit card late fees at a level far below banks’ actual costs will force card issuers to reduce credit lines, tighten standards for new accounts and raise APRs for all consumers — even those who pay on time," stated Rob Nichols, president and CEO of the ABA. 
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