The US Consumer Financial Protection Bureau (CFPB) issued a statement on Wednesday announcing that it has proposed a new rule to curb credit card late fees and save consumers up to $9 billion a year in payments
WASHINGTON (Pakistan Point News / Sputnik - 02nd February, 2023) The US Consumer Financial Protection Bureau (CFPB) issued a statement on Wednesday announcing that it has proposed a new rule to curb credit card late fees and save consumers up to $9 billion a year in payments.
The proposed rule would make "over the top" late fee amounts illegal in the United States, CFPB said in a statement. Americans pay approximately $12 billion in credit card late fees every year, while the proposal could reduce that amount by up to $9 billion, the statement said.
"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," CFPB Director Rohit Chopra said in the statement. "Today's proposed rule seeks to save families billions of dollars and ensure the credit card market is fair and competitive."
The rule would amend regulations to ensure late fees are "reasonable and proportional" to the costs banks incur handling late payments, the statement said. The rule would lower the immunity provision for late fees to $8 for a missed payment, ban automatic annual inflation adjustments and ban late fee amounts above 25% of a consumer's required payment, the statement said.
US President Joe Biden and other members of the White House Competition Council discussed the proposal during a meeting on Wednesday.
"Nobody is saying that you shouldn't pay your fees on time, and no one says the bank should lend you money for free, but that's what banks charge interest for," Biden said during the meeting.
The proposed rule comes following a CFPB request for public comment on so-called junk fees and an advanced notice of proposed rulemaking on credit card late fees last year, the statement added.