Consumer Financial Protection Bureau bans excessive credit card late fees
The average credit card late fee rose from $23 in 2012 to $32 in 2022
(InvestigateTV) — The Consumer Financial Protection Bureau (CFPB) is banning excessive credit card late fees, lowering the typical fee from $32 to $8.
CFPB Director Rohit Chopra said he wants to make things easier for consumers by cracking down on these late fees.
“About 20 years ago, we started seeing pervasive abuses in the credit card industry. So, Congress, a little over a decade ago, passed a law fixing a lot of it,” Chopra explained. “We did some research and found that some of the biggest credit card issuers in the country found a loophole, and they were exploiting it for billions of dollars each year. So, we have put into place updated rules that they can’t exploit, and they can’t abuse.”
Chopra said the updated rule applies to credit card issuers with more than 1 million open accounts.
He said in addition to lowering the dollar amount for late fees, this new rule will end the “abuse of the automatic annual inflation adjustment,” and will require credit card issuers to show proof that the higher fee is necessary to cover the actual collection costs.
The changes haven’t come without criticism.
Six bank associations and commerce chambers across the country have filed a lawsuit against the CFPB challenging its new rule.
The associations and chambers claim the new rule will ultimately harm the consumers the CFPB is charged to protect by resulting in more late payments, increasing debt, reducing credit access as well as increasing APRs for all consumers.
“Look, it’s no surprise that junk fee lobbyists are going to fight back. They’ve been making a killing off of charging people for fake or worthless services,” Chopra noted. “So, we’re not surprised that they’re filing lawsuits to stop it, but we are on strong ground and are not going to back down. They need to follow the law that congress has passed, and they cannot be illegally exploiting credit card customers.”
Chopra suggested that consumers pick credit cards carefully, and even consider switching to a smaller bank or credit union to help avoid high interest rates.
People who think they may have been a victim of a law violation can file a report with the CFPB.
We reached out to the American Bankers Association and attorneys representing the chambers and associations for comment. They referred us to a press release about the litigation.
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