The Consumer Financial Protection Bureau plans to cut credit card late fees to $8, wiping out up to $9 billion a year in fees that have become highly profitable for banks and credit card companies.
CFPB Director Rohit Chopra plans to propose a rule on Wednesday that would slash late fees from the current $30 for the first fee and $41 for each subsequent missed payment, a potential five-fold drop. The proposal would set credit card late fees at reasonable levels and no longer allow late fees to be pegged annually to inflation.
The CFPB’s proposal would address a loophole created by the Federal Reserve Board in 2010 that allowed issuers to raise credit card late fees every year. The announcement was expected given that Chopra has been targeting banks and other firms over the past year for charging so-called “junk fees,” that he has said far exceed the cost of a product or service.
“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,” Chopra said in a press release. “Today’s proposed rule seeks to save families billions of dollars and ensure the credit card market is fair and competitive.