Credit Card Fees Slashed for Millions of Americans

Credit card fees will be slashed as part of new rules brought in by the Joe Biden administration.

According to a release issued by the White House on Tuesday morning, the Consumer Financial Protection Bureau (CFPB) has finalized a ruling that will cut the typical credit card late fee from the current average of $32 to $8.

The new rule closes a loophole in a federal law called the CARD Act, which allows major credit card issuers to charge increasing fees if individuals are late in paying off their debt.

The release reads: “President Biden is committed to making sure corporations are held accountable when they try to rip off Americans, including when they break the law while keeping prices high.”

Context

Biden is seeking to cut costs and charges for consumers amid several polls showing Americans are dissatisfied with the current state of the economy.

An NBC News poll, conducted between January 26 and 30, of 1,000 registered voters gave Trump a 22-point advantage over the president on the question of which candidate would do a better job handling the economy—55 percent to 33.

A CBS News/YouGov poll of 2,159 adults, conducted between February 28 and March 1, showed that 68 percent thought “looking back,” that the economy was good under Trump, while 38 percent thought it was good currently.

What We Know

According to a February 2024 report from the CPFB, major credit card companies charged over $105 billion in interest in 2022. This was the primary cost of credit cards to consumers

According to the White House, the late fee changes will save credit card users “$10 billion a year, or an average savings of $220 per year for the more than 45 million people who are charged these late fees annually.”

The CARD Act, first introduced in 2010, banned credit card companies from charging excessive penalty fees by. A first credit card late fee was capped at $25 under the act, and $35 for subsequent late payments. Fees were also tied to inflation.

“Today’s rule ends the era of big credit card companies hiding behind the excuse of inflation when they hike fees on borrowers and boost their own bottom lines,” CFPB Director Rohit Chopra said in a statement.

What’s Next

The rule is expected to apply from May, and applies to credit card issuers with more than one million open accounts.

Will Fee Cuts Mean Payment Check Refunds?

A spokesperson for the Consumer Financial Protection Bureau told Newsweek that the rule would not be applied to late fees already incurred prior to the start date.

“The rule only applies to late fees moving forward and takes effect 60 days after publication in the Federal Register,” the spokesperson said. “We expect publication in a few weeks, so that is likely to be less than three months from now.”

Update 3/6/24, 11:14 a.m. ET: This story was updated with additional information.