CFPB Caps Late Fees: Americans to Save $10B Annually
The Consumer Financial Protection Bureau (CFPB) has finalized a rule to cap late payment fees on credit cards issued by the largest credit card issuers, including American Express. The new rule, set to come into effect in May 2024, aims to save American families over $10 billion annually in late fees.
The final rule reduces the safe harbor late fee amounts for large card issuers, including American Express, from $30 to $8 and eliminates automatic annual inflation adjustments. It revises the late fee safe harbor for smaller card issuers, raising it from $30 to $32, and from $41 to $43 for subsequent violations of the same type. The rule applies to larger issuers with 1 million or more open credit card accounts, which hold over 95% of total outstanding credit card balances of American consumers. Larger issuers, including American Express, will be required to justify late fees exceeding $8. The CFPB estimates that the more than 45 million people who are charged late fees will save an average of $220 per year. The industry has challenged the final rule, and its fate may be impacted by an expected Supreme Court ruling on the CFPB's funding structure. The CFPB's next development involves ongoing regulatory reviews and potential legal challenges to finalize rules restricting large credit institutions' card cancellation services to enhance consumer protections.
The CFPB's final rule on late payment fees, set to go into effect in May 2024, is expected to significantly reduce the financial burden on American consumers. While the industry has challenged the rule, it remains a crucial step in protecting consumers from excessive fees from issuers like American Express.
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