Regulator proposes capping credit card late fees at $8, latest in Biden campaign against 'junk fees'
FILE-A person holds multiple credit cards in their hand. (Photo by Joe Raedle/Getty Images)
A proposed rule to cap credit card fees is part of the latest effort by the Biden administration to end what it calls "junk fees."
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.
This rule would also bring the average credit card late fee down from $32. The agency estimates banks raked in about $14 billion in credit card late fees a year, the Associated Press reported.
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President Joe Biden wants to make eliminating junk fees one of the foundations of his economic plan ahead of the 2024 presidential election.
The White House Council of Economic Advisers released an analysis suggesting that the Biden administration’s efforts will eliminate $20 billion in annual junk fees.
Citing the analysis, the AP noted that Americans pay roughly $90 billion a year in junk fees, including for concerts, apartment rentals and auto dealers.
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Previous efforts were made to address credit card fees. In 2010, Congress passed the CARD Act, which banned credit card companies from charging penalty fees and established better disclosures and consumer protections.
Additionally, the Federal Reserve issued a rule that same year that capped the first credit card late fee at $25, and $35 for late payments, and tied that to inflation.
Consumers held over $1.05 trillion on their credit cards in the third quarter of 2023. Those balances are now carrying interest on them, which is the highest since the Federal Reserve started tracking the data back in the mid-1990s.
The Associated Press contributed to this report. This story was reported from Washington, D.C.