CFPB bans exorbitant credit card late fees, lowers common fees from $32 to $8


Washington DC – The Consumer Financial Protection Bureau (CFPB) today finalized a rule to cut exorbitant credit card late fees by closing a loophole exploited by large card issuers. The provision will reduce costs to American families by more than $14 billion annually. The CFPB estimates that once the final rule takes effect, lowering the general fee from $32 to $8, U.S. households will save more than $10 billion annually in late fees. This will save an average of $220 per year for the more than 45 million people charged late fees.

“For more than a decade, credit card giants have exploited loopholes to collect billions of dollars in junk fees from American consumers,” said CFPB Director Rohit Chopra. “Today’s rule ends the way large credit card companies use inflation as an excuse to raise borrowers’ expenses and improve their own profits.

Congress passed the Credit Card Responsibility and Disclosure Act of 2009 (CARD Act) out of concerns that credit card companies were establishing a business model of penalties, fees, and bait-and-switch tactics. The law prohibits credit card companies from charging excessive fines and establishes clearer disclosure and consumer protections.

In 2010, the Federal Reserve Board of Governors voted to adopt a rule implementing the CARD Act, which stipulates that banks can only charge fees that cover the costs incurred by banks for late payments. However, the rule includes an exemption that allows credit card companies to avoid liability if they charge no more than $25 for a first late payment and no more than $35 for subsequent late payments, both of which would be charged each year. Adjusted for inflation. Those amounts have soared to $30 and $41, even as credit card companies have moved to cheaper digital processes. Congress transferred authority to administer the rules of the CARD Act from the Federal Reserve to the CFPB.

After a thorough review of market data related to the 2010 exemption, the CFPB's final rule adopts a lower threshold of $8 and ends automatic inflation of that amount for issuers with 1 million or more open accounts Adjustment.

The CFPB found that card issuers have generally been charging consumers more late credit card fees each year since 2010, and that this number will exceed $14 billion by 2022, accounting for $130 billion in interest and fees charged by card issuers to consumers. More than 10%. Late fees are on top of many other penalties credit card companies take against consumers who make late payments, including additional interest charges, loss of grace periods, negative credit reports, credit limit reductions and higher interest rates on future purchases. Since the passage of the CARD Act, average late fees among major card issuers have increased steadily, from $23 at the end of 2010 to $32 in 2022.

The CFPB's final rule applies to the largest credit card issuers, those with more than 1 million open accounts. These companies account for more than 95% of total outstanding credit card balances. Smaller issuers tend to charge borrowers lower rates and fees, while the vast majority of the largest issuers charge late fees close to the maximum allowable late fee amount, CFPB data shows. Today’s final rules:

  • Reduce late payment tax exemption amount to $8: For larger card issuers, an average late fee of $8 is enough to cover collection costs for late payments, according to data analyzed by the CFPB.
  • End the abuse of automatic annual inflation adjustments: The CFPB found that many issuers have consistently raised late fees each year, but there is no evidence of increased costs. The CFPB's final rule eliminates the automatic annual inflation adjustment for the $8 late fee threshold. This adjustment was added by the Federal Reserve and is not required by law. The CFPB will monitor market conditions and adjust the $8 late fee exemption threshold as necessary.
  • Ask credit card issuers to show them their math: Larger card issuers can charge fees above the threshold as long as they can prove that the higher fees cover their actual costs of collecting payments.

The rule does not change the ability of credit card issuers to raise interest rates, reduce credit limits and take other steps to deter consumers from late payments. In fact, the rule would increase the desire of credit card companies to promote on-time payments because it would reduce the incentive to build a business model for late payment fees.

CFPB Credit Card Jobs

Today's final rule is part of the CFPB's ongoing efforts to address issues and promote competition in the $1 trillion credit card market. The CFPB is working to help consumers find lower rates as consumers paid a record $130 billion in credit card interest and fees in 2022, with the average cardholder balance exceeding $5,000.

A recent CFPB report found that increases in annual interest rate margins charged by the largest issuers would generate approximately $25 billion in additional interest income in 2023. Lower, about 8 – 10 percentage points lower than the largest 25 credit card companies. Last week, the CFPB issued guidance to control manipulated comparison shopping results for credit cards and other products and is developing a consumer-facing tool that, once completed, will provide an unbiased way for people seeking new credit cards to Compare credit card terms and interest rates.

The CFPB has also taken enforcement actions against credit card companies for violations. Recent actions include ordering Bank of America to pay a $30 million fine and repay tens of millions of dollars to consumers for illegal conduct, including withholding credit card rewards bonuses the company explicitly promised and opening unauthorized accounts. The CFPB also ordered Citizens Bank to pay a $9 million fine for failing to provide refunds to consumers who reported fraud or billing errors, and ordered Citibank to pay $25.9 million for knowingly and unlawfully discriminating against Armenian-American credit card applicants.

Read today's final rule text.

The effective date of the final rule is 60 days after publication of the rule in the Federal Register.

Consumers can submit complaints about financial products or services by visiting the CFPB website or calling (855) 411-CFPB (2372).

Employees of companies who believe their company has violated federal consumer financial laws are encouraged to send their information to whistleblower@cfpb.gov.


The Consumer Financial Protection Bureau is a 21st century agency charged with enforcing and enforcing federal consumer financial laws and ensuring fair, transparent, and competitive markets for consumer financial products.For more information, please visit www.consumerfinance.gov.



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