Credit Card Late Fees Would Drop Under New Biden Administration Rule

The Biden administration is trying to rein in what it says are unnecessarily high credit card late fees, putting in place a new consumer protection rule it says will lower them.

“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.”

The move is part of a slate of measures unveiled Tuesday by regulators and agencies meant to show the Biden administration is trying to boost competition and bring down costs to consumers as many voters are still chafing from the effects of prices increases in 2022 and 2023.

Those other moves include a proposal by Federal Communications Commission Chairwoman Jessica Rosenworcel to limit bulk billing of broadband services in multi-household buildings, such as condo and apartment complexes, and a move by the Agriculture Department to boost competition for processing in livestock and poultry markets.

But the CFPB rule, to be officially published Tuesday, may get the most notice. The bureau said banks collected more than $14 billion in late payments in 2022 and that those fees made up more than 10% of all the fees and interest banks charged customers.

A 2009 law was meant to limit late fees to no more than the amount needed to actually recover late payments. But in implementing the law, the Federal Reserve provided an exception for banks that charged no more than $25 for the first late payment and $35 for subsequent ones, and it allowed those amounts to rise with