Biden Administration Implements Measures to Limit Credit Card Late Fees
The Consumer Financial Protection Bureau (CFPB) has finalized a rule to limit late payment fees charged by large credit card companies, capping them at $8. This represents a significant decrease from the average fee of $32 previously charged for missed or late payments. The rule, which the CFPB estimates could save U.S. consumers around $10 billion annually, is part of the Biden administration's initiative to address what it terms as "junk fees" in the banking sector. This initiative is expected to be a focus in the upcoming State of the Union address by Vice President Joe Biden.
While consumer advocacy groups have applauded the decision, foreseeing an average annual saving of $220 per cardholder, financial industry groups, including the American Bankers Association and the U.S. Chamber of Commerce, have expressed strong opposition. They argue that the rule may lead to unintended negative consequences such as higher interest rates, more late payments, lower credit scores, and reduced credit availability. The banking industry has announced intentions to sue the CFPB over this rule, asserting that it exceeds the bureau's authority. Additionally, some Republicans have criticized the move, suggesting that fees serve as a form of financial discipline for consumers.
Amidst this controversy, federal officials are also introducing a "strike force" in collaboration with the Department of Justice and the Federal Trade Commission to combat rising prices and address corporate practices that may not pass savings onto consumers. This strike force has received criticism from the U.S. Chamber of Commerce, which views it as a form of government price control. The policy change is scheduled to go into effect in 60 days, but its ultimate implementation will likely be influenced by the outcome of the industry's legal challenge and the Supreme Court's decision on the CFPB's funding and regulatory powers.
