Current:Home > FinanceMiss a credit card payment? Federal regulators want to put new limits on late fees -AssetTrainer
Miss a credit card payment? Federal regulators want to put new limits on late fees
View
Date:2025-04-16 00:48:25
The Consumer Financial Protection Bureau is moving ahead with a plan to place new limits on credit card late fees that it says will save consumers money and prohibit companies from charging excessive penalties. But banking groups say the proposal would result in higher costs for consumers.
The proposal comes less than a year after the bureau found that credit card companies in 2020 charged $12 billion in late fees, which have become a ballooning revenue source for lenders.
"Over a decade ago, Congress banned excessive credit card late fees, but companies have exploited a regulatory loophole that has allowed them to escape scrutiny for charging an otherwise illegal junk fee," CFPB Director Rohit Chopra said in a statement.
"Today's proposed rule seeks to save families billions of dollars and ensure the credit card market is fair and competitive," Chopra added.
The CFPB's proposal would cap late fees at $8
In 2010, the Federal Reserve Board approved a rule stating that credit card companies couldn't charge any late fees that exceeded what those companies spent in collection costs, such as any money laid out notifying customers of missed payments.
Companies were allowed to avoid that provision by instead charging late fees at a rate set by the Fed. Those fees have increased with inflation, and credit card issuers can now charge $30 for a first late payment and $41 for any other late payment within six billing cycles.
Under the CFPB's proposed rule published Wednesday, late fees would be capped at $8. Credit card companies could charge more if they could prove that it was necessary to cover the costs of collecting the late payment, but the bureau said it had preliminarily found that the revenue generated by late fees was five times higher than related collection costs.
The proposal would also end the automatic inflation adjustment and cap late fees at 25% of the required minimum payment rather than the 100% that's currently permitted.
Last year, a CFPB report on credit card late fees found that most of the top credit card issuers were charging late fees at or near the maximum allowed by regulation, and cardholders in low-income and majority-Black areas were disproportionately impacted by the charges.
Banking groups slam the CFPB's proposed rule
Financial institutions have been pushing back on changes to late fee rules since the CFPB signaled its intention to rein them in last year. They responded to Wednesday's proposal with similar opposition.
Rob Nichols, president and CEO of the American Bankers Association, said in a statement that the proposal would result in customers having less access to credit.
"If the proposal is enacted, credit card issuers will be forced to adjust to the new risks by reducing credit lines, tightening standards for new accounts and raising APRs for all consumers, including the millions who pay on time," Nichols said.
Credit Union National Association president and CEO Jim Nussle said the association strongly opposes the proposal. Nussle said it would "reduce access to safe and affordable open-end credit," and he slammed the CFPB for not getting more input from small financial institutions.
veryGood! (64)
Related
- Which apps offer encrypted messaging? How to switch and what to know after feds’ warning
- U.S. concerns about TikTok are absolutely valid, expert says
- Angus Cloud, Caleb McLaughlin, Iris Apatow & Zaya Wade Star in Puma's New Must-See Campaign
- Doyle Brunson, the 'Godfather of Poker,' has died at 89
- Opinion: Gianni Infantino, FIFA sell souls and 2034 World Cup for Saudi Arabia's billions
- Comic Roy Wood Jr. just might be the host 'The Daily Show' (and late night TV) need
- In a Sheep to Shawl competition, you have 5 people, 1 sheep, and 3 hours — good luck!
- Meghan McCain Says She Was Encouraged to Take Ozempic After Giving Birth to Daughter Clover
- Retirement planning: 3 crucial moves everyone should make before 2025
- You'll Be Surprised By Which Sister Kylie Jenner Says She Has the Least in Common With
Ranking
- Travis Hunter, the 2
- Sara Bareilles thought 'Into the Woods' would last 2 weeks — she ended up on Broadway
- Andy Cohen created a reality show empire but being a dad is his biggest challenge yet
- Angus Cloud, Caleb McLaughlin, Iris Apatow & Zaya Wade Star in Puma's New Must-See Campaign
- Nearly 400 USAID contract employees laid off in wake of Trump's 'stop work' order
- House select committee hearing paints China as a strategic antagonist
- Dancing With the Stars' Emma Slater Files for Divorce from Sasha Farber
- 'Red Memory' aims to profile people shaped by China's Cultural Revolution
Recommendation
South Korean president's party divided over defiant martial law speech
5 new fantasy novels invigorate old tropes
Iran schoolgirls poisoned as some people seek to stop education for girls, Iranian official says
Kelsea Ballerini's Call Her Daddy Bombshells: Morgan Evans Divorce, Chase Stokes Romance and More
'Malcolm in the Middle’ to return with new episodes featuring Frankie Muniz
U.S.-Italian national Elly Schlein, who campaigned for Obama, becomes 1st woman to lead Italy's Democratic Party
Mexican army confirms soldiers killed 5 civilians in border city, sparking clash between soldiers and residents
'Succession,' Season 4, Episode 5, 'Kill List'