CFPB Proposes Rule to Control Credit Card Late Fees

On February 1, 2023, the CFPB issued a proposed rule to curb excessive credit card late fees that cost American families about $12 billion each year. According to the CFPB, major credit card issuers continue to profit off late fees that are protected by an expansive immunity provision. The Bureau believes that the proposed rule would help ensure that over the top late fee amounts are illegal. 

From CFPB Director Rohit Chopra’s statement:

“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. Today’s proposed rule seeks to save families billions of dollars and ensure the credit card market is fair and competitive.”

Based on the CFPB’s estimates, the proposal could reduce late fees by as much as $9 billion per year. The proposed rule follows a request for comment on junk fees, a research report, and an advance notice of proposed rulemaking on credit card late fees that the CFPB issued last year. The CFPB’s proposed changes would, if finalized:

  • Lower the immunity provision dollar amount for late fees to $8;

  • End the automatic annual inflation adjustment; and

  • Cap late fees at 25% of the required minimum payment.

Additionally, the proposal seeks comment on other potential changes to CARD Act regulations. For instance, it requests comment on whether the CFPB’s proposed changes should apply to all credit card penalty fees, whether the immunity provision should be eliminated altogether, whether consumers should be granted a 15-day courtesy period, after the due date, before late fees can be assessed, and whether issuers should be required to offer autopay in order to make use of the immunity provision.

Comments will be accepted until April 3, 2023, or within 30 days after publication of the Notice of Proposed Rulemaking in the Federal Register, whichever is later.

Read the CFPB’s announcement here.

The proposed rule can be found here.

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