Huge Credit Card Late Fees May Be Going Away

Back in October, the White House announced an ambitious initiative to get rid of rampant junk fees, including in the banking industry. On Tuesday, the Consumer Financial Protection Bureau announced a big move toward that end, with a new regulation that will significantly reduce the late fees that customers have to fork over for their credit cards, reports the Washington Post.

• A smaller hit: Per the new CFPB proposal, customers would pay just an $8 late charge, down from an average of $32—unless the issuing banks can "show their math" and prove they need to charge more to make up any losses. The government agency notes that this adjustment would save US families more than $10 billion in late fees annually, with an average savings of $220 per year for the 45 million or so individuals who pay such late charges.

• Closing a loophole: The CFPB says the new regulation would take on a 2010 immunity provision that allowed credit card companies to charge up to $25 for a first fee, then $35 thereafter (figures since adjusted for inflation to $30 and $41, respectively). The agency notes the new rule won't affect credit card companies' ability to take other measures meant to dissuade customers from paying late, such as slashing credit lines or raising interest rates.
• Bank resistance: Late fees recouped last year by such major credit card issuers as Bank of America, Citibank, and JPMorgan Chase amounted to $14 billion, per the CFPB, so it's expected there will be pushback on the new regulation from banks, including via a lawsuit.
• Other 'junk' fees: Advisers to President Biden are set to meet with him Tuesday about forming a new "strike force" that would take on other onerous charges in the housing, grocery, and health care industries, among others, per the AP. The outlet notes that Biden has made the elimination of such fees "one of the cornerstones of his administration's economic agenda heading into the 2024 election."

(More credit cards stories.)