Federal regulator’s new rule caps credit card late fees at $8

WASHINGTON — The Biden administration announced a rule Tuesday to cap all credit card late fees, the latest effort in the White House push to end what it has called junk fees and a move that regulators say will save Americans up to $10 billion a year.

The Consumer Financial Protection Bureau’s new regulations will set a ceiling of $8 for most credit card late fees or require banks to show why they should charge more than $8 for such a fee.

The CFPB rule would bring the average credit card late fee down from $32. The bureau estimates banks brought in roughly $14 billion in credit card late fees a year.

President Joe Biden highlighted the proposal along with other efforts to reduce costs to Americans at a meeting of his competition council on Tuesday. The Democratic president also said he’s forming a new strike force to crack down on illegal and unfair pricing on things like groceries, prescription drugs, health care, housing and financial services.

Biden said at the start of the council meeting that the current late fees are generating five times more money than what it costs credit card companies to collect late payments.

“They’re padding their profit margins and charging hardworking Americans more,” Biden said.

The strike force will be led by the Justice Department and the Federal Trade Commission, according to a White House statement.

The Biden administration has portrayed the White House Competition Council as a way to save people money and promote greater competition within the U.S. economy.

The White House Council of Economic Advisers produced an analysis indicating that the Biden administration’s efforts overall will eliminate $20 billion in annual junk fees. The analysis found that consumers pay about $90 billion a year in junk fees, including for concerts, apartment rentals and auto dealers.

The effort appears to have done little to help Biden politically ahead of this year’s presidential election. Just 34% of U.S. adults approve of Biden’s economic leadership, according to a new survey by The Associated PRESS-NORC Center for Public Affairs Research.

Sen. Tim Scott, R-S.C., criticized the CFPB cap on late fees, saying that consumers would face greater costs through higher interest rates and less access to credit.

Rob Nichols, CEO of the American Bankers Association, said the CFPB “relied on flawed assumptions and a mischaracterization of the important role late fees play in promoting responsible consumer behavior.”

The U.S. Chamber of Commerce said it will file a lawsuit to try to prevent the federal agency from capping late fees at $8.

“The Consumer Financial Protection Bureau has exceeded its authority,” said Neil Bradley, the chamber’s executive vice president and chief policy officer. “The agency’s final credit card late fee rule punishes Americans who pay their credit card bills on time by forcing them to pay for those who don’t.”