$8 limit on credit card late fees: Here’s what you need to know
The Biden Administration has approved a new limit for credit card late fees with the purpose of eliminating junk charges. Here are the details.
Americans have accumulated massive amounts of debt, passing $1 trillion last year and continuing to reach record levels. Credit card loan delinquency is also on the rise.
According to the Consumer Financial Protection Bureau (CFPB), more than 45 million people are charged a late fee on their credit card payments. These late fees cost credit card users billions of dollars a year. In light of these figures and to provide relief cash-strapped individuals, the Biden Administration has approved new regulations to establish a limit of $8 dollars on late fees and eliminate the notorious “junk charges“.
“For more than a decade, credit card giants have been exploiting a loophole to reap billions of dollars in junk fees from American consumers. The current rule ends the era in which big credit card companies hide behind the excuse of inflation when they raise rates on borrowers to improve their own bottom lines,” argued CFPB Director Rohit Chopra, through a statement released to CNN.
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Here’s what you should know about the $8 limit
According to official information from the CFPB, this new regulation will only apply to large financial companies; that is, those that have more than one million active accounts. This represents 95% of clients who have some credit card debt. With this measure, the agency estimates that families will save close to $20 billion a year.
Given that the regulations take effect 60 days after their publication in the Federal Register, the $8 limit for late payments is expected to apply beginning on the first of June.
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Chamber of Commerce seeks to prevent new rule
However, the new measure has earned criticism from various banking institutions.
Given this, the United States Chamber of Commerce threatened to sue to prevent the measure from entering into force in the near future.
“Once again, the Consumer Financial Protection Bureau has exceeded its authority. The agency’s final rule on credit card late fees punishes Americans who pay their credit card bill on time, forcing them to pay for those who don’t,” according to Neil Bradley, policy director of the Chamber.