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President Joe Biden is spotlighting new moves by the Consumer Financial Protection Bureau to cut excessive credit-card late fees that cost American families about $12 billion each year.
The CFPB unveiled proposals that will potentially save Americans up to $9 billion a year by targeting late fees that are currently protected by an “expansive” immunity provision, which has allowed credit-card companies to hike fees along with inflation even when they face no additional collection costs.
“Junk fees are not only costly to consumers, but they can stifle competition by encouraging companies to use increasingly sophisticated tools to disguise the true price consumers face,” the White House said in a statement on Wednesday. “By reducing these fees and increasing transparency, we can provide relief to consumers and make our economy more competitive, particularly for new and growing businesses.”
Biden is also calling on Congress to pass a junk-fee prevention bill to crack down on concert-ticket fees and airline fees aimed at families who want to sit with their young children; to eliminate early-termination fees for TV and internet service; and to ban surprise resort and destination fees.
The proposed CFPB rule would lower the immunity provision for late fees for a missed payment to $8 from as much as $41 now and end an automatic annual inflation adjustment. It would also prohibit late-fee amounts higher than 25% of a consumer’s required payment.
The CFPB rule would amend regulations in the Credit Card Accountability Responsibility and Disclosure Act of 2009, which includes language that late fees should be “reasonable and proportional” to the costs incurred by issuers to handle late payments.
Major credit-card issuers in the U.S. include companies such as American Express Co.
AXP,
Discover Financial Services
DFS,
Mastercard Inc.
MA,
and Visa Inc.
V,
as well as major banks such as JPMorgan Chase & Co.
JPM,
Wells Fargo & Co.
WFC,
Citigroup Inc.
C,
and Bank of America Corp.
BAC,
Also read: It’s ‘pay’ time for buy now, pay later purchases—here are 5 ways to handle the debt
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