New rule under Biden would save Americans $10 billion a year in credit card fees

As part of the Biden's administration's efforts to eliminate so-called "junk fees," the Consumer Financial Protection Bureau has finalized a rule that would cap credit card late fees at $8.

The average credit card late fee is $32, so the savings for consumers could be huge. The CFPB estimates that, once it takes effect, the new rule will save Americans over $10 billion a year.

"For over a decade, credit card giants have been exploiting a loophole to harvest billions of dollars in junk fees from American consumers," Rohit Chopra, director of the Consumer Financial Protection Bureau, said Tuesday. "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."

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The corporate watchdog Acountable.US praised the move but also noted that it will likely "run into immediate legal and legislative attacks from big banks."

"Big banks have no need to nickel and dime everyday families with hidden, high-cost late fees based on the massive profits they brag about to wealthy investors," said Accountable.US' Liz Zelnick. "Bank industry lobbyists claim junk fees teach responsibility, but families who are price-gouged with late fees as high as $41 buried in the fine print only get a hard lesson in corporate greed."

There's already been some pushback, as the U.S. Chamber of Commerce says it plans to file a lawsuit to block the rule. The lobbying group called the rule "misguided and harmful."

Sen. Elizabeth Warren (D-Mass.), who proposed and established the CFPB, praised the move in a tweet and said it was the "government working for the people, not the big banks."

The CFPB, in its push to reduce or eliminate junk fees, also plans to heavily reduce how much banks can charge for debit card overdraft fees. The new rule for credit card late fees is expected to take effect in June.

"Junk fees, like the excessive late fees credit card companies charge, are yet another tactic corporations use to prey on customers and juice their profit margins even further," said Bilal Baydoun, director of policy and research at the Groundwork Collaborative. "CFPB's new rule demonstrates that policymakers can—and must—take on predatory, deceptive behavior and act as a strong check on corporate power."