Credit card late fees capped at $8, CFPB announces

ATLANTA - Here’s a big win for the consumer. The federal government has ordered a cut in late credit card fees - down to $8. 

We’ve all been late from time to time on a credit card payment. Maybe you didn’t have the money yet, or you simply lost track of time. It happens. But the mistake has traditionally been costly.

Credit card late fees cost Americans $14 billion every year. Well, this month, the Consumer Financial Protection Bureau announced its cutting those fees for large credit card issuers. Smaller groups are not included.

The math here is impressive. According to the Bureau, the average late fee drops to $8, down from an average $32 per late payment. This is an average savings of $220 per year for more than 45 million Americans. Overall, this will save Americans $10 billion dollars a year.

The CFPB’s director says the credit card industry has been exploiting a loophole. The Bureau said in a press release that the industry was building a business model on "penalties, fee harvesting and bait-and-switch tactics."

These high-dollar fees were supposed to be banned in the 2009 CARD Act. A card issuer could only charge what it cost to do business. Nothing more. But the industry, according to the federal government, started adjusting for inflation, raising the cost higher despite using "cheaper, digital business processes."

But know that the industry is suing over this, calling the new $8 limit unreasonable. The industry claims that this low fee doesn’t act as a deterrent to paying your bills late. 

President Biden in 2023 said in his State of the Union address that his administration would tackle what it considers abusive fees that drag families down financially. 

If a judge doesn't step in and stop this, as soon as the rule hits the Federal Register, the industry will have a few short months to implement this.