Biden Caps Credit Card Late Fees at $8: How This Helps Your Bank Account
Written by
Yaël Bizouati-Kennedy
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The Consumer Financial Protection Bureau (CFPB) finalized a rule to slash credit card late fees to $8, from the current average of $32 on March 5 as part of President Joe Biden’s administration’s broader effort to crack down on junk fees.
This will save consumers a whopping $10 billion a year, or an average savings of $220 per year for the more than 45 million people who are charged these late fees annually, according to a statement on the White House website.
“For too long, surprise and hidden late fees have burdened consumers. By closing the loophole that has allowed companies to charge these excessive late fees, today’s action will not only save consumers billions of dollars but promote fair and competitive markets,” according to the statement.
The new rule will also help consumers’ finances in additional ways. As the CFPB explained in a statement, when consumers don’t make required payments, they can face a long list of consequences.
For instance, they pay extra interest, their credit report gets hit, their credit line can get cu and they can face a late fee.
“However, late fees and other penalties aren’t supposed to be a core profit driver, since this would mean that credit card companies might benefit more when consumers miss payments,” according to the CFPB.
This also comes amid Americans’ record-high piling of credit card debt. Indeed, as CNN reported, Americans’ card debt recently exceeded a record $1.1 trillion- and in turn, some borrowers, especially Millennials and those with lower incomes, have been falling behind on their credit card debt.
“For over a decade, credit card giants have been exploiting a loophole to harvest billions of dollars in junk fees from American consumers,” CFPB director Rohit Chopra said in a March 5 press release. “Today’s rule ends the era of big credit card companies hiding behind the excuse of inflation when they hike fees on borrowers and boost their own bottom lines.”
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