- ORIGINAL NEWS
New CFPB rule caps banks’ credit card late fees at $8
- SUMMARY
The Consumer Financial Protection Bureau (CFPB) has announced a new rule that will limit late fees charged by banks to $8 per occurrence.
This move caps late fees from an average of $32, saving an estimated 45 million card users $220 on average each year.
The rule comes after the CFPB reviewed data related to the 2009 Card Act, which allowed card issuers to significantly increase late fees over time.
The CFPB believes credit card companies have exploited a loophole to make excessive profits from late penalties, especially from borrowers with low credit scores who face disproportionately high late fees.
The rule also ends automatic inflation adjustments for late fees and adjusts fees if necessary to cover collection costs.
However, it does not directly impact interest rates.
Industry groups have criticized the CFPB rule, citing concerns about higher interest rates and reduced credit availability.
The CFPB counters that it has the authority to implement the rule under the Card Act.
The rule takes effect 60 days after it’s published in the Federal Register, giving banks time to adjust their practices.
- NEWS SENTIMENT CHECK
- Overall sentiment:
positive
Positive
“The Consumer Financial Protection Bureau unveiled a new rule on Tuesday that it said would cap late fees that banks charge customers at $8 per incident.”
“By cutting late fees to $8 from an average of around $32, more than 45 million card users would save an average of $220 annually, the CFPB said in a release.”
Negative
“The rule’s policy goals are, at best, consumer redistribution, not consumer protection,” Consumer Bankers Association head Lindsey Johnson said in a statement.”
“Equally concerning is that this rule continues the CFPB’s deeply problematic practice of rushing to prioritize headlines at the expense of legal process.”