Current:Home > ScamsMiss a credit card payment? Federal regulators want to put new limits on late fees -EverVision Finance
Miss a credit card payment? Federal regulators want to put new limits on late fees
Fastexy View
Date:2025-04-11 01:49:39
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! (25322)
Related
- Chuck Scarborough signs off: Hoda Kotb, Al Roker tribute legendary New York anchor
- The AI industry uses a light lobbying touch to educate Congress from a corporate perspective
- Megan Thee Stallion’s Hot Girl Fashion Evolution Makes Us Wanna Hiss
- Paige DeSorbo Swears Everyone Who Buys These Pants Loves Them So Much, They End Up Getting Every Color
- The Super Bowl could end in a 'three
- US higher education advocates welcome federal support for Hispanic-serving institutions
- With father of suspect charged in Georgia shooting, will more parents be held responsible?
- Kylie Jenner and Jordyn Woods Prove Their Friendship is Strong 5 Years After Feud
- Scoot flight from Singapore to Wuhan turns back after 'technical issue' detected
- Recreational marijuana sales begin on North Carolina tribal land, drug illegal in state otherwise
Ranking
- B.A. Parker is learning the banjo
- A 14-year-old boy is charged with killing 4 people at his Georgia high school. Here’s what we know
- Cardinals' DeeJay Dallas gets first touchdown return under NFL's new kickoff rules
- Week 1 fantasy football rankings: PPR, half-PPR and standard leagues
- Military service academies see drop in reported sexual assaults after alarming surge
- Watch as time-lapse video captures solar arrays reflecting auroras, city lights from space
- Gordon Ramsay's wife, Tana, reveals PCOS diagnosis. What is that?
- Business up front, party in the back: Teen's voluminous wave wins USA Mullet Championship
Recommendation
The Daily Money: Spending more on holiday travel?
Mother’s warning to Georgia school about suspect raises questions about moments before shooting
Neighbor's shifting alibis lead to arrest in Mass. woman's disappearance, police say
School districts race to invest in cooling solutions as classrooms and playgrounds heat up
San Francisco names street for Associated Press photographer who captured the iconic Iwo Jima photo
Paige DeSorbo Swears Everyone Who Buys These Pants Loves Them So Much, They End Up Getting Every Color
Authorities search for a man who might be linked to the Kentucky highway shootings that wounded five
Why #MomTok’s Taylor Frankie Paul Says She and Dakota Mortensen Will Never Be the Perfect Couple