The Consumer Financial Protection Bureau on Wednesday proposed a new rule to ban excessive late fees on credit cards.
The CFPB says that even though Congress banned excessive fees in 2009, the Federal Reserve Board of Governors issued actions to circumvent the law. As a result, credit card company penalty policies now cost consumers $12 billion each year.
The rule proposed Wednesday would lower the amount credit card holders can owe for late fees under the immunity provision to $8 from as much as $41. It would also end the automatic annual inflation adjustments and cap minimum payment late fees at 25%.
The new credit card rule will reduce excessive late fees by as much as $9 billion per year, according to the CFPB.
The move against credit card late fees is part of a larger policy drive to promote competition in consumer markets, officials said, as the Biden Administration is planning to urge Congress to ban “junk fees” and penalties driving up a variety of consumer costs. The White House pointed to fees airlines charge to allow relatives to sit next to young children as just one example.
The CFPB, meanwhile, will seek public comment on other potential credit card fee changes. These include whether to make the proposed rule apply to all credit card penalties, eliminate the immunity provision altogether, create a 15-day courtesy period for credit card holders before levying late fees, and a requirement where credit card companies must offer to autopay services as a condition of immunity provisions.