Credit card late fees can cost families nationwide as much as $12 billion each year.
The Consumer Financial Protection Bureau (CFPB) is proposing a new set of changes that would tackle those over-the-top late fees. It says the goal is to make it illegal for credit companies to charge what it calls “excessive fees” on top of what you already pay in interest rates.
One part of this new rule would lower the fee for late payments to $8 dollars That’s compared to as much as $41 that’s currently allowed for each missed payment.
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The CFPB says companies would only be able to charge more if they can prove a higher fee is necessary. This proposal would also eliminate the automatic annual inflation adjustment.
“Credit card companies have been hiking these fees even though they don’t necessarily have much more costs. It’s just another example of how people feel cheated by some of these fees on top of the inflation they’re dealing with in their daily life,” said Rohit Chopra, Director of the Consumer Financial Protection Bureau.
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Another part of this rule would cap late fee charges to 25 percent of the cardholder’s required payment.
The agency estimates this could lower excessive late fees by as much as $9 billion a year. Chopra also believes the impact would be minimal for credit card companies.
“[Credit card companies] already charge lots of interest to people who are late on their payments.
they have all sorts of ways to make money off of credit card lending,” said Chopra. “So we just see this as a component of excessive fees that isn’t critical to making their business model work.”
Right now, there’s a public comment period for this proposal. Then once the rule is finalized, agency officials say you can expect changes to these late fees next year.
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