Consumer Groups Back $8 Cap on Credit Card Late Fees

Advocacy groups express support for Consumer Bureau effort to curb fees

A coalition of consumer groups is expressing support for an effort by the Consumer Financial Protection Bureau (CFPB) to cap credit card late fees at a maximum charge of $8.

The groups submitted comments in favor of the proposed rule.

Companies currently charge people as much as $41 for each missed payment, and these fees result in billions of dollars in annual junk fee revenue for credit card companies. In fact, the CFPB notes that American families pay $12 billion a year in credit card late fees. The new proposal would reduce late fee payments by about $9 billion a year.

“We strongly support the proposed safe harbor of $8 for credit card late fees and thank the CFPB for proposing it,” said Chi Chi Wu, senior attorney at the National Consumer Law Center. “Unlike the previous safe harbor amounts of $30 and $41, $8 is a fair amount that is reasonable and proportional to the costs incurred by credit card companies for late payments.”

The CFPB’s proposed rule would establish the $8 amount as a “safe harbor.” Credit card companies could charge more if they can justify the amount by showing that $8 does not adequately compensate them for their costs in dealing with late payments. Advocates encouraged the CFPB to require credit card companies to publicly disclose the data relied upon to justify higher amounts to “show their math.”

“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,” said CFPB Director Rohit Chopra. “This proposed rule seeks to save families billions of dollars and ensure the credit card market is fair and competitive.”

Photo byMark OFlynnonUnsplash