This move is expected to reduce the typical late fee for credit card payments from $32 to $8.
March 5, 2024, 3:42 p.m. ET
• 7 min reading
President Joe Biden on Tuesday touted his administration's recent efforts to reduce late credit card payment fees, which is estimated to save families $10 billion each year.
The Consumer Financial Protection Bureau approved a rule Tuesday that lowers the typical late fee for credit card payments from $32 to $8.
“That’s an average annual savings of $220 for more than 45 million Americans who normally pay late fees. A lot of money,” Biden said at a meeting with his competition council.
“We estimate that banks are incurring five times more late payments than it costs to collect late payments. They increase their profit margins,” he said.
“Today’s ruling ends the era of large credit card companies hiding behind the excuse of inflation as they raise fees for borrowers and boost their own profits,” CFPB Director Rohit Chopra said in a statement.
President Joe Biden speaks with members of the media before boarding Marine One on the South Lawn of the White House in Washington to travel to Camp David, Maryland, for the weekend, Friday, March 1, 2024.Andrew Harnik/ AP
The agency said its new rule closes a loophole in a federal law called the CARD Act that allows major credit card issuers to charge customers increasing fees if they default on their payments. Over time, these late fees increased to as much as $41. The new rule would cap it at $8.
It would also prevent card issuers from automatically increasing fees based on inflation.
Industry groups representing major banks and credit card issuers have opposed the rule, arguing it could force them to raise the interest rates they charge consumers.
“The policy goals of the rule are, at best, consumer redistribution, not consumer protection,” the Consumer Bankers Association, which represents banks and credit card issuers, said in a statement.
“Today’s flawed final rule will not only reduce competition and increase the cost of credit, but will also lead to more delinquencies, higher debt, lower credit scores and reduced access to credit for those who need it most,” said President and CEO of American Bankers Association said Rob Nichols in a statement. “The Bureau’s misguided decision to cap late credit card payment fees at levels well below banks’ true costs will force card issuers to slash credit lines, tighten standards for new accounts and APRs for all to increase consumers – even for those who pay on time.”
The CFPB's rule is expected to take effect in mid-May. It applies to issuers with more than 1 million open accounts.
President Joe Biden meets Italian Prime Minister Giorgia Meloni in the Oval Office of the White House in Washington, Friday, March 1, 2024.Evan Vucci/AP
Biden administration officials said “a handful of large banks” were responsible for $14 billion in credit card late fees charged to American households each year.
Biden highlighted the rule along with a handful of other measures he is taking to try to cut costs and sell his economic policies as beneficial to Americans ahead of the November election.
He pointed to a new report from the Council of Economic Advisers that says the government's actions on “junk fees” alone will save Americans more than $20 billion each year.
He has also announced the launch of a new “strike force” to crack down on unfair and illegal practices that drive up prices.
The “Strike Force” will target conduct that drives up prices for Americans through “anti-competitive, unfair, deceptive or deceptive business practices,” targeting areas such as “prescription drugs and health care, food and grocery, housing and financial services ” focus .”
The Competition Council also announced efforts to crack down on poultry and meat processors by announcing a final new rule to protect farmers and ranchers and promote competitive agricultural markets.
In this file photo, President Joe Biden and Lael Brainard, assistant to the president and director of the National Economic Council, participate in a discussion about protecting consumers from hidden junk fees with business leaders at the Eisenhower Executive Office Building near the White House. in Washington, DC, USA, June 15, 2023.Sarah Silbiger/Portal
Another area they're looking at is “bulk billing” by internet providers, particularly highlighting a proposed Federal Communications Commission rule that would ban the practice of even charging landlords to everyone who lives or works in a building Charge you for a particular internet, cable or satellite service if you don't want it or haven't agreed to it.
This decision to highlight these efforts to save Americans money comes two days before Biden delivers his State of the Union address, in which he is expected to outline the work his administration has done to reduce everyday costs for Americans .