The measure would reduce late fees for typical credit cards from $32 to $8.
President Joe Biden on Tuesday touted his administration's latest effort to cut late credit card fees, which is estimated to save all households $10 billion a year.
The Consumer Financial Protection Bureau on Tuesday finalized a rule that would lower late fees on common credit cards from $32 to $8.
“That's an average savings of $220 a year for the more than 45 million Americans who normally have to pay late fees. That's a lot of money,” Biden said during a meeting of the Competition Council.
“We estimate that banks are incurring five times as much late fees as it costs to collect them. Banks are inflating their profit margins,” he said.
CFPB Director Rohit Chopra said in a statement: “Today's rules end the days when major credit card companies would hide behind inflationary excuses when they raised fees for borrowers and increased their own profits.” Stated.
The agency said the new rules close a loophole in a federal law called the CARD Act that allowed major credit card issuers to charge increasing fees when customers pay late. Over time, these late fees increased to up to $41. Under the new rules, that cap will be $8.
It would also prevent card issuers from automatically raising fees based on inflation.
Industry groups representing major banks and credit card issuers oppose the rule, saying it could force them to raise the interest rates they charge consumers.
“At best, the policy goal of this rule is consumer redistribution, not consumer protection,” the Consumer Bankers Association, which represents banks and credit card issuers, said in a statement.
“Today's flawed final rule not only reduces competition and increases the cost of credit, but also increases late payments, increases debt, lower credit scores,'' said the American Bankers Association President and CEO. “And it will result in reduced access to credit for those who need it most.” Rob Nichols said in his statement: “The Bureau's erroneous decision to limit credit card late fees to a level far below the bank's actual cost is forcing card issuers to reduce credit limits, tighten standards for new accounts, and pay on time. It would force higher annual interest rates for all consumers, including consumers.”
The CFPB's rules are scheduled to go into effect in mid-May. Applies to issuers with 1 million or more opened accounts.
Biden administration officials said a “few large banks” account for $14 billion in credit card late fees charged to American households each year.
Biden highlighted the rule along with several other actions he is taking ahead of the November election to cut costs and sell the benefits his economic policies will bring to Americans.
He cited a new report from the Council of Economic Advisers that says the administration's action on “junk fees” alone could save Americans more than $20 billion each year.
He also announced the formation of a new “strike force” to crack down on unfair and illegal practices that keep prices high.
The Strike Force targets practices that increase prices for Americans through “anticompetitive, unfair, deceptive, and deceptive business practices,” including “prescription drugs and health care, food and household goods, housing and financial services,” and other businesses. focus on the areas of . ”
The Competition Council also announced an effort to go after poultry and meat processors by announcing final new rules to protect farmers and ranchers and promote competitive agricultural markets.
Another area they are working on is “bundle billing” by internet providers, specifically where a landlord charges everyone who lives or works in the building for certain internet, cable, or satellite services. Highlights a proposed Federal Communications Commission rule that would prohibit the practice of charging If they don't want it or haven't opted in.
The decision, which highlights these efforts to save Americans money, comes two days before Biden delivers his State of the Union address, in which he announced the administration's efforts to reduce the daily costs of living for Americans. They are expected to explain their efforts.
