The US Consumer Financial Protection Bureau (CFPB) has proposed a new rule to rein in “excessive” credit card fees.
According to CFPB estimates, excessive credit card fees cost American families about $12 billion each year, and that its proposal could reduce late fees “by as much as $9 billion per year”.
It adds that companies charge as much as $41 for each missed payment, resulting in “billions of dollars” in annual junk fee revenue for credit card companies.
The CFPB also estimates that the income generated by the largest issuers from late fees is “approximately five times greater than the collection costs” the companies incur for late payment violations.
If the proposed rule is finalised, the CFPB says it would lower the immunity provision dollar amount for late fees to $8, eliminate the automatic annual inflation adjustment, and cap fees at 25% of the required minimum payment from the current 100%.
The proposal is also inviting comments on other potential changes to the Credit Card Accountability Responsibility and Disclosure Act of 2009 (CARD Act) regulations by 3 April, on topics including credit card penalty fees, and the fate of the immunity provision.
“Over a decade ago, Congress banned excessive credit card late fees, but companies have exploited a regulatory loophole that has allowed them to escape scrutiny for charging an otherwise illegal junk fee,” says CFPB director Rohit Chopra.
Chopra adds that the proposed rule “seeks to save families billions of dollars and ensure the credit card market is fair and competitive”. – FF