Federal regulators finalized a rule on Tuesday (5) to limit most late credit card payment fees to $8, as part of a broader effort by the Biden administration to eliminate unwanted charges.
The Consumer Financial Protection Bureau estimates that the new regulation, first proposed in February 2023, will save families more than $10 billion a year by reducing fees from an average of $32.
The new rule applies to large credit card issuers – those with more than 1 million accounts. These companies account for more than 95% of the total outstanding credit card debt, according to the CFPB.
This new push to reduce credit card fees comes at a time when the White House aims to show it is taking steps to help families struggling with the high cost of living. The CFPB also proposed a rule in January that would reduce excessive overdraft fees.
This also comes as Americans continue to rack up credit card debt, which recently surpassed the record $1.1 trillion. Some borrowers, especially Millennials and those with lower incomes, have fallen behind on their credit card debts after more than two years of high inflation.
More than 45 million people pay late credit card fees every year, according to the CFPB. These individuals will now save an average of $220 per year, regulators say.
The CFPB stated in its announcement that the new rule will take effect 60 days after its publication in the Federal Register. A CFPB spokesperson told CNN that the agency expects to publish the rule in the Federal Register in a few weeks. This puts the rule on track to take effect on June 1.
However, some experts believe that the government-imposed limit could be challenged in court, potentially even reaching the U.S. Supreme Court.
Source: CNN